ASX-listed Finexia offers an alternative exposure to the childcare sector. Picture via Getty Images
The childcare sector is growing up fast, and ASX companies like Finexia are benefitting
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- Childcare booms with government backing and rising demand
- Childcare stocks offer growth and dividends for investors
- ASX-listed Finexia offers an alternative exposure to the sector
Treasurer Jim Chalmers is set to present the 2025-2026 federal budget on March 25. However, if a federal election is called before then, the timing could change.
One thing that’s clear is that, while Chalmers is expected to boost spending in a range of sectors, he’s also expected to be giving special backing to the childcare industry.
Australia’s childcare sector is indeed in the middle of a boom.
It’s roughly a $20 billion market, and employs over 200,000 people. The industry has boosted female workforce participation, which is expected to increase GDP by 7.5%.
Various research reports have highlighted a massive rise in demand for these services.
As more women enter the workforce and with the 0-4 age group growing rapidly, around 300 new childcare centres are needed every year just to meet rising demand.
As a result, as SBS reported recently, jobs in this sector are among the fastest-growing in Australia.
The government is throwing substantial support behind the sector to make sure it can meet that demand. Federal funding, subsidies, wage increases for childcare workers – it’s all happening.
And with more than 70% of industry revenue coming from government funding, it’s clear this sector is one the government is deeply invested in.
“This ongoing demand for care workers isn’t going away and that’s really continuing to drive employment – and it’s going to continue well into 2025,” said Seek senior economist, Blair Chapman.
Why childcare is a good sector to invest in
When it comes to steady, long-term growth, childcare stocks are quickly becoming a go-to for investors looking for a reliable and profitable space.
Families will always need childcare, whether the economy is booming or in a downturn. This makes childcare stocks defensive investments – meaning they’re less likely to be impacted by the swings and crashes that affect other sectors.
Yes it’s not immune to challenges, but it’s certainly more stable than some more cyclical industries.
Childcare stocks also tend to be great dividend payers.
Since many childcare operators and real estate investment trusts (REITs) are focused on stable, recurring revenue, they often reward investors with reliable dividend payouts.
This makes childcare investments attractive to those looking for steady income in addition to capital growth.
How do you invest in the childcare sector?
There are various ways you can invest into this growing sector. One option, of course, is to become a direct owner of a childcare centre.
Anne Flaherty, an economist at PropTrack, says that the demand for these centres is attracting a wide range of buyers, from small private investors to big institutions and real estate investment trusts (REITs).
“Childcare assets appeal to a broad range of investor budgets as they can range from just $1 million to well above $10 million depending on the asset,” she said.
But if starting or purchasing an entire childcare centre is out of your reach, there are still ways for everyday investors to get involved on the ASX.
You can invest in childcare operators like G8 Education (ASX:GEM) or in property companies that focus on childcare tenants like Charter Hall Social Infrastructure REIT (ASX:CQE) and Arena REIT (ASX:ARF).
These options offer exposure to the growing sector without the need for large-scale ownership.
There are also smaller childcare stocks on the ASX such as Mayfield Childcare (ASX:MFD) and Embark Education Group (ASX:EVO).
An alternative way to invest in this sector
ASX-Listed Finexia Financial Group (ASX:FNX), meanwhile, oversees the Childcare Income Fund, which offers an alternative investment opportunity in this sector.
This fund provides transitional funding to experienced childcare operators during the critical ramp-up period of newly opened or reopened centres.
With a strategic focus on helping these centres reach a sustainable operational capacity – typically around 80% within the first year – the fund plays a crucial role in facilitating subsequent bank financing.
Finexia Childcare Income Fund has consistently delivered an impressive monthly payment (annualised percentage rate) of 10%, making it an attractive option for investors seeking solid returns.
Finexia’s Childcare Income Fund Distribution History
| Fund Performance | Monthly Payment - Annualised % Rate | RBA Cash | Margin |
|---|---|---|---|
| Nov22 | 8.00% | 2.85% | 5.15% |
| Dec22 | 8.00% | 3.10% | 4.90% |
| Jan23 | 8.00% | 3.10% | 4.90% |
| Feb23 | 9.00% | 3.35% | 5.65% |
| Mar23 | 9.25% | 3.60% | 5.65% |
| Apr23 | 9.25% | 3.60% | 5.65% |
| May23 | 9.50% | 3.85% | 5.65% |
| Jun23 | 9.75% | 4.10% | 5.65% |
| Jul23 | 9.75% | 4.10% | 5.65% |
| Aug23 | 9.75% | 4.10% | 5.65% |
| Sep23 | 9.75% | 4.10% | 5.65% |
| Oct23 | 9.75% | 4.10% | 5.65% |
| Nov23 | 10% | 4.35% | 5.65% |
| Dec23 | 10% | 4.35% | 5.65% |
| Jan24 | 10% | 4.35% | 5.65% |
| Feb24 | 10% | 4.35% | 5.65% |
| Mar24 | 10% | 4.35% | 5.65% |
| Apr24 | 10% | 4.35% | 5.65% |
| May24 | 10% | 4.35% | 5.65% |
| Jun24 | 10% | 4.35% | 5.65% |
| Jul24 | 10% | 4.35% | 5.65% |
| Aug24 | 10% | 4.35% | 5.65% |
| Sep24 | 10% | 4.35% | 5.65% |
| Nov24 | 10% | 4.35% | 5.65% |
| Dec24 | 10% | 4.35% | 5.65% |
| Jan25 | 10% | 4.35% | 5.65% |
Rated “VERY STRONG” by Foresight Analytics & Ratings, Finexia said the fund has earned high confidence from investors in its ability to deliver risk-adjusted returns.
“Investors who are keen on contributing to societal benefits, such as supporting childcare services, may be drawn to this fund,” said a note from Finexia.
“Also, individuals looking to diversify their investment portfolios with a sector that shows resilience to economic fluctuations and has a segmented market share, might consider this fund.”
Finexia also said the fund is designed for investors seeking to mitigate risk by avoiding the high volatility of equity markets.
“It appeals to those looking for steady returns, focusing on income-generating investments rather than the unpredictable swings of the stock market. This approach provides a more consistent and less volatile investment experience.”
Childcare stocks on the ASX
| Code | Description | Last | 1 month return% | 6 months return% | 12 months return% | MktCap |
|---|---|---|---|---|---|---|
| MFD | Mayfield Childcr Ltd | 0.425 | -2% | -30% | -46% | $32,055,459 |
| EVO | Embark Early Ed | 0.755 | -2% | 5% | 26% | $139,446,249 |
| GEM | G8 Education Limited | 1.305 | -5% | 2% | 8% | $1,060,453,036 |
| NDO | Nido Education | 0.865 | 15% | 2% | -7% | $197,280,296 |
| CQE | Charter Hall Soc In | 2.785 | 8% | 1% | 2% | $1,054,044,987 |
| ARF | Arena REIT. | 3.635 | -7% | -10% | 4% | $1,434,709,624 |
| FNX | Finexia Financialgrp | 0.275 | -7% | -8% | 20% | $17,133,591 |
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.
At Stockhead we tell it like it is. While Finexia Financial Group is a Stockhead advertiser, it did not sponsor this article.
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