How to profit from an ageing population
The most common way to profit from our ageing population in Australia is to invest in healthcare stocks. The major problem for investors jumping on this bandwagon is Health Care stocks are very expensive at the moment and pay tiny dividends due to elevated share prices.
So another way to tap into this theme and get paid some handsome dividends is to buy Challenger. The major reason being is that Challenger’s target market is retirees or those that are planning to. Challenger is Australia’s largest seller of Annuities and the company is seeing phenomenal growth in demand.
In general, the very conservative retirees are scared of the Stock Market and they don’t want to buy another property so they need a bit of extra income over what term deposits pay. In steps Challenger to solve their problem and load them up with Annuities.
Challenger sells different types of Annuities, however, the main features are:
Your interest and capital payments are guaranteed, regardless of share market movements or interest rate fluctuations.
With some annuities, you can elect to index your payments so they keep pace with inflation or increase at a fixed indexation rate.
Flexible Terms and Payments
With annuities you can choose your investment term. It can be as short as one year, as long as 50 years or even for your lifetime. You can also select how often you get paid - monthly, quarterly, half-yearly or annually.
In the case of a lifetime annuity you can enjoy regular, dependable payments for the rest of your life or if you choose, the life of another person.
When an annuity is bought with money rolled over within the superannuation system by a person aged 60 or over, the regular payments are tax free.
Access to your money
If you would like to cancel your annuity, in most cases you will receive a withdrawal amount, but you may receive back less than you invested originally and less than you would have received had you held the annuity for its agreed term.
In a nutshell, a retiree hands over their money and Challenger makes regular payments over their entire life or an agreed upon term. Challenger makes a bucket load from managing the money and may also keep a portion of the funds when the retiree passes or the term is over.
I also wouldn’t be surprised if either Macquarie Bank or AMP lodge a takeover bid for this company. The stock is trading on a forward PE of about 12.2 times and paying a yield of approximately 3.35% fully franked (4.78% grossed up).
Challenger has just announced that their Annuity sales rose 22% to $3.4 billion last financial year with a net profit of $328 million.
Tap into this retiree boom and buy some Challenger today.