"Nothing can be said to be certain," Benjamin Franklin famously quipped, "except death and taxes." Such certainty has seen Australia's largest and only listed funeral services provider, InvoCare (ASX:IVC), deliver compound annual returns exceeding 14% for the last decade.

InvoCare — a portmanteau of "Innovation, Vocation, Care" — operates 250 funeral homes, 14 cemeteries and crematoria, and is behind 60 funeral brands including national names such as White Lady and Simplicity.

For some, the thought of investing in funerals services can stir an uncomfortable macabre feeling. However, the logical counter is that InvoCare provides an essential service — one we'll all inevitably need one day — and the stability of the industry makes it a worthy candidate for our investment capital.

Attractive economics

With the tailwind of Australia's ageing population blowing at its back, InvoCare remains well-placed for steady growth over the long term: the Australian Bureau of Statistics projects a near doubling of annual deaths over the next 30 years.

This growth is complemented by a level of pricing power that comes with providing an essential service, particularly cemeteries and crematoria. Testament to this is InvoCare's consistent increases in average contract values above inflation over the long term. That said, apparently new market entrants' main angle is to compete on price.

Another attractive, and somewhat unique, industry feature is the growth in funeral insurance. Around 14% of InvoCare's Australian funerals are now prepaid. In fact, the business is sitting on over $420 million in prepaid services, adding further stability to what is an already predictable industry.

A market leader in Australia, New Zealand and Singapore, 2014 saw the business venture into the $20 billion US market in search of growth. Holding around a third of the market in Australian and New Zealand means competition concerns limit expansion options at home.

Opportunities and challenges of moving State-side

Case volumes in InvoCare's US entry market of southern California have been tracking 20% below plan, and the start-up losses are weighing on the performance of the collective business. Although performance is expected to improve with a ramp up in marketing, InvoCare is up against some large, well-established listed funeral operators in Service Corporation (NYSE:SCI), StoneMor Partners (NYSE:STON), and Carriage Services (NYSE:CSV), as well as privately-held Arbor Memorial Services.

But don't be completely dissuaded by this hefty-sounding competition. The American industry has a number of attractive features, including higher average funeral costs and a still fragmented market. In stark contrast to Australia, the top 5 operators only account for around 37% of the industry — around InvoCare's own market share back home.

Most of the 19,500 funeral homes in the US are small operations, often owned by the same families for generations. Similarly, many of the 120,000 cemeteries belong to families, nonprofits, and religious institutions. Consequently, the consolidation opportunity remains immense, albeit at increased level of risk for InvoCare being a new, foreign entrant.

A healthy dose of caution is warranted in considering the US opportunity. The company flagged an initial investment of US$8 million over 3 years, with annual losses running at US$2 million. However, the recent results showed that losses are running above this and ramp up remains slower than forecast. Patient investors should remain wary until firm runs are on the board. Too many Australian businesses have gone offshore chasing stars of growth, only to return with dusts of shareholder capital.

Recently appointed CEO Martin Earp, however, is no rookie. His previous role as Chief Executive Officer of Campus Living Villages included operating businesses in the US, and the InvoCare board had 'US growth' front of mind when they appointed him in May 2015. But Mr Earp has his work cut out for him to deliver the growth expectations built into the current share price.

US peers Service Corp and Carriage Services are trading at less than 20 times earnings, while InvoCare is changing hands at closer to 25 times, putting InvoCare on the expensive side.

The post Investing in the business of death appeared first on The Motley Fool Australia.

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Australian tech-wreck survivor, Integrated Research Limited (ASX: IRI), has taken on the world in IP telephony services and returned investors more than 700% over the last five years.

The company's enterprise software has infiltrated over 1,000 businesses globally, and its resume of customers reads like a 'who's who' of international commerce: a quarter of Fortune 500 companies, 4 of the world's 10 largest companies, 9 of the top 10 US banks, 7 of the 10 biggest telcos, 4 out of 10 biggest oil and gas companies, and 6 of the 10 biggest stock exchanges.

With a market cap sitting a touch under $350 million, Integrated Research lives outside the ASX300, and under the radar of many investors. But what, exactly, does this little-known Aussie do?

Integrated Research is the leading global provider of performance monitoring and diagnostics software for business-critical computing and VoIP (voice over internet protocol) networks. Its flagship product PROGNOSIS is an integrated suite of applications that monitors and manages distributed IT infrastructure, payments systems, unified communications, and Web applications. Put more simplistically, a health monitor for business technology systems.

Communication and payments are two cornerstones of everyday life that keep rapidly evolving. Integrated Research remains brilliantly positioned to profit handsomely from both the migration to Internet Protocol Telephony networks — IPT or VoIP as it is commonly called — and the massive long-term growth in real-time payment processing.

Integrated has had a seat at the IP telephony table since the technology's infancy in 2000. It began by monitoring Cisco's IP systems but now supports other key VoIP providers such as Avaya, Nortel and Microsoft's Lync and Skype.

Sales are supported by a large installed base of major customers, a strong partnership network, and a three-fold revenue model: customers pay upfront license fees to use the software (just over half of revenue), plus they pay annual maintenance fees, (typically around 20% of the license fee), for the lifetime of the customer relationship (one-third of revenue), and consulting services make up the balance.

Boring, boring software

Enterprise software slips into the 'too boring' basket for many investors, but Integrated's thick 40% gross margins and 20% net profit margins are attention-grabbing. And the appeal doesn't stop there.

Maintenance retention rates into the mid-90% range means the average life of those customers is nudging 20-plus years, so it's easy to know where the next meal is coming from. During difficult economic times, this recurring revenue provides a safety cushion: businesses may delay a new purchase, but they're less likely to cut maintenance expenditures.

There's more that'll really get your CPU racing.

The 39% return on equity is high enough to give you a nose bleed, and zero-debt balance sheet strong enough to keep you there. In fact, the company was sitting on over $15 million cash when it last reported.

And with a global A-list of customers, it should come as little surprise that 95% of revenue is earned offshore, providing easy international diversification for Australian-dominated portfolios.

The company has been on a growth tear in recent years. Last year revenue increased 32%, while profit soared 68% — thanks in part to a falling Australian dollar — but driven by the underlying strength of the business. But there may be some trouble afoot.

A recent stumble

The company's recent half year guidance pointed to a slowing of growth, with revenue set to gain a modest 17% and net profit to disappointingly slide by a similar proportion.

Full details won't be revealed until the company reports, but determining whether the first half of 2016 is a permanent change, or just a bump in the road, could be very rewarding.

It's unlikely the growth will stop here. The company is sensibly reinvesting around a fifth of revenue into research and development — the pipeline for future growth. Add to that the July 2015 acquisition of US-based IQ Services, which provides a platform for next generation testing capabilities and extends the existing product line.

Shares have nosedived 25% since reaching a high of $2.80 at the three-quarter mark last year, to less than $2.00 in early 2016. Things could get particularly choppy when the company reveals the full details on 18 February.

Foolish takeaway

Combining a strong reputation and loyal customers, several of whom are among the world's largest, with forward-thinking new solutions, is a proven model for increasing profits and margins.

Integrated Research stands to continue profiting from the VoIP tidal wave and surging real time transactions. Its high customer retention delivers solid recurring revenue, with strong and improving margins.

The company's 3.6% partly-franked dividend yield is well supported by a rock solid balance sheet, though the mid-20s price to earnings multiple may look high to some market participants in light of recent disappointing growth guidance.

If things get rough, that may provide added opportunity for level-headed long-term investors.

The post Up 700% in 5 years: Where to next for Integrated Research Limited? appeared first on The Motley Fool Australia.

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Hi Motley Fool Readers,

Below I'm going to reveal a little known, one-of-a-kind, ASX listed company.

You'll likely be surprised to learn the company is in agriculture. But I assure you this business is rather unique, and you'll probably be interested in its 7% yield.

As Australia's only ASX-listed agricultural property trust, it's an investment with a difference.

The World Needs To Eat

According to the UN Food and Agriculture Organisation, global food production must double by 2050 to feed the world's growing population. This must be achieved while arable land is in decline, particularly in developed countries.

Urbanisation, salinisation, desertification, and general overuse all contribute to decreasing either the total area of arable land available, or the productivity of land in use.

Add to that the suggested impacts of climate change and shifts in water availability, and you can see a compounding challenge ahead for food and fibre production.

The growing world population means much needs to be achieved with a shrinking, finite arable resource base. As my farming father says, "they're not making any more land". All of this combined must have upward pressure on quality farmland prices over the long term.

If you can spot an investment thesis here, but don't know the first thing about farming, allow me to introduce you to a property trust with a difference.

This property trust owns a diverse portfolio of agricultural assets worth over $260 million. Property and infrastructure comprise 54% of the portfolio, biological assets (plants and livestock) 26%, water entitlements 15%, and the final 5% are in other assets.

The company's property portfolio is predominantly in poultry farms, vineyards and almond orchards. Its recent expansion efforts have focused on almond orchards.

This comes as no surprise given the drought crippling California (home to 80% of global almond production), benefiting Australian companies like Select Harvests (ASX:SHV). It's likely this company will invest further in almonds.

Exposure, without the risk

The company we're talking about is Rural Funds Group (ASX:RFF).

Interestingly, RFG owns and leases its assets, rather than operating them. It thereby avoids much of the volatility and uncertainty of agricultural commodity prices.

Similar to commercial or industrial property, RFG's leases are largely 'triple net', meaning the tenant is responsible for property expenses over and above rent fees. Tenants include one of Australia's largest poultry producers, Baiada, as well as ASX-listed companies Select Harvests and Treasury Wine Estates (ASX:TWE).

RFG's weighted average lease expiry sits at 12.9 years, but a proposed almond orchard deal with Olam Australia looks set to extend this to 15.7 years. Each lease contains an indexation clause (generally around inflation), plus market review mechanisms.

The business pays quarterly distributions. The 2016 forecast distribution of 8.93 cents per share implies a yield of around 7% on current prices, with the potential for further long-term capital appreciation. (Australian agricultural land prices have appreciated at around 5% per annum for the past 30 years.)

Rural Funds Group is Australia's only listed diversified agricultural property trust, consequently the investment and the asset class is unfamiliar to many investors. It's widely accepted that agricultural assets have a low correlation to more popular asset classes, therefore providing a strong portfolio diversification opportunity.

Add to that, the proximity of Australia's vast land mass to Asia's booming middle-class, and imminent free trade agreements, puts our country in the box seat to play a leading role in feeding Asia and the rest of the world in the twenty-first century.

Australia's efficient production, relatively low price of arable land, reliable rule of law, security of title, transparent and (usually) stable government combine to make it an attractive place to invest in agriculture.

Coupled with its attractive yield, that makes Rural Funds Group an easy way to own your own piece of quality Australian farmland.

That said, because its share price has had a strong run lately, RFG doesn't offer the compelling value it once did… unlike our latest Motley Fool Share Advisor recommendation.

Myself and Scott Phillips have discovered an even cheaper company, one that's trading on a forecast gross (fully franked) dividend yield of 9%.

To instantly find out the name of this dirt cheap company, and to ensure you receive our incredibly popular "Income Extra" feature this coming Thursday, simply click here to subscribe to Motley Fool Share Advisor.

With subscriptions currently on offer at a 50% discount, I'm confident you won't be disappointed.

The post The little known company with the big 7% yield appeared first on The Motley Fool Australia.

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Agriculture doesn't have a great reputation as an investment destination, but that may be about to change.

According to the UN Food and Agriculture Organisation, global food production must double by 2050 to feed the world's growing population. This must be achieved while arable land, particularly in developed countries, is in decline.

Urbanisation, salinisation, desertification, and general overuse all contribute to decreasing either the total area of arable land available, or the productivity of land in use. Add to that the suggested impacts of climate change and shifts in water availability, and you can see a compounding challenge ahead for food and fibre production.

The growing world population means much needs to be achieved with a shrinking, finite arable resource base. As my father says, "they're not making any more land". All of this combined must have upward pressure on quality farmland prices over the long term.

A property trust with a difference

If you can spot an investment thesis here, but don't know the first thing about farming, allow me to introduce a property trust with a difference.

Rural Funds Group (ASX: RFF) owns a diverse portfolio of agricultural assets worth over $260 million. Property and infrastructure comprise 54% of the portfolio, biological assets (plants and livestock) 26%, water entitlements 15%, and the final 5% are in other assets.

The company's property portfolio is predominantly in poultry farms, vineyards and almond orchards. Its recent expansion efforts have focus on almond orchards. This comes as no surprise given the drought crippling California (home to 80% of global almond production), benefiting Australian companies like Select Harvests (ASX: SHV). It's likely Rural Funds Group will invest further in almonds.

Exposure, without the risk

Interestingly, RFG owns and leases its assets, rather than operating them. It thereby avoids much of the volatility and uncertainty of agricultural commodity prices.

Similar to commercial or industrial property, RFG's leases are largely 'triple net', meaning the tenant is responsible for property expenses over and above rent fees. Tenants include one of Australia's largest poultry producers, Baiada, plus ASX-listed companies Select Harvests and Treasury Wine Estates (ASX: TWE).

RFG's weighted average lease expiry sits at 12.9 years. A proposed almond orchard deal with Olam Australia looks set to extend this to 15.7 years. Each lease contains an indexation clause (generally at inflation), plus market review mechanisms.

The business pays quarterly distributions. The 2016 forecast distribution of 8.93 cents per share implies a yield of around 8%, with the potential for further long-term capital appreciation. (Australian agricultural land prices have appreciated at over 5% per annum for the past 30 years.)

While many ASX-listed property trusts trade above their book value, RFG is priced roughly in line with its $1.15 book value (per share). However, this number understates the true value of the group's water entitlement assets.

In accordance with accounting standards and ASIC guidance, water entitlements are recorded at cost in statutory accounts. When adjusted to current market rates, the book value jumps to $1.22, putting RFG shares at a small discount to the value of its underlying assets.

Rural Funds Group is Australia's only listed diversified agricultural property trust, consequently the investment and the asset class is unfamiliar to many investors. It's widely accepted that agricultural assets have a low correlation to more popular asset classes, therefore providing a strong portfolio diversification opportunity.

The post An 8% yield in agriculture appeared first on The Motley Fool Australia.

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