Image source: Getty Images
Shareholders of Medibank Private Limited (ASX:MPL) may be wondering how big Medibank’s dividend and dividend yield will be in 2022.
For readers who don’t know, Medibank is the largest private health insurance company on the ASX. It operates through the Medibank and AHM brands. As of April 30, 2022, Medibank had 1,932,000 resident policyholders.
How much will the Medibank 2022 dividend be?
Let’s start with what we already know.
Medibank’s board of directors decided to declare an interim dividend of 6.1 cents per share for the first half of FY22. This represented a dividend payout ratio of 79.1% of underlying earnings per share (EPS). In HY22, the dividend was increased by 5.2% while the underlying EPS increased by 4.4%.
According to Commsec estimates, Medibank could pay an annual dividend per share of 13.1 cents in 2022. This translates to an expected premium dividend yield of 5.9% at the current Medibank share price.
Commsec’s figures imply further growth in Medibank’s dividend in the coming years. In FY23, Medibank is expected to pay an annual dividend of 14 cents per share, increasing to 14.4 cents in FY24. This equates to forward dividend yields of 6.3% and 6 .5%.
Broker Citi expects an even bigger dividend from Medibank. He thinks private health insurance’s ASX stock could pay a premium dividend yield of 6.1% in FY22 and 6.5% in FY23.
Where is Medibank?
The company recently told an investor conference that growth in private health insurance participation remains “strong.”
Medibank said there would have been a change in customers’ attitude towards private health insurance. The company says private coverage is seen as attractive “given concerns about wait times at public hospitals.” It is also considered more affordable and better value than in the past, which promotes better retention.
Medibank noted that there have been six consecutive quarters of growth in industry policyholders. Rolling 12-month policyholder growth fell from 2.68% in September 2021 to 2.79% in December 2021. The company said new entrants to the industry and younger cohorts are “contributors majors” to growth, which Medibank says shows positive signs for the sustainability of the industry. .
Growth in industry participation is expected to be above pre-pandemic levels in the medium term. However, management said affordability was still key to sustaining growth.
Comments on the outlook can influence Medibank’s share price and can provide an indication of business performance. It could also provide insight into Medibank’s profitability and dividend.
In FY22 through April 2022, business saw resident policyholder growth of 2.3%. It targets policyholder growth of between 3.1% and 3.3%, including continued growth of the Medibank brand.
The underlying average net loss burden per policy unit is expected to be approximately 2.3% among resident policyholders in FY22.
Is the Medibank stock price a buy?
Citi is currently pricing the company as a buy, with a price target of $3.65. This implies a potential rise in Medibank’s share price of more than 10% over the next year.
The broker noted that ASX stock may make acquisitions.