What is the outlook for the Medibank dividend in FY23?

How good will the FY23 payout be from Australia's biggest private health insurer?

| More on:
Two healthcare workers, a male doctor in the background with a woman in scrubs in the foreground,, smile towards the camera against a plain backdrop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Medibank paid a sizeable dividend in FY22 of 13.4 cents per share
  • There are projections Medibank could pay a bigger dividend in FY23 and FY24 of 15.2 cents per share and 15.8 cents per share, respectively
  • Medibank is predicting policyholder growth in FY23

The Medibank Private Limited (ASX: MPL) dividend might be attractive for some investors focused on investment income.

Medibank is the largest private health insurer in Australia, giving it good scale benefits. This enables it to make a good profit and pay attractive dividends.

Firstly, let's look at Medibank's dividend from FY22.

FY22 dividend recap

In the FY22 result, Medibank's board decided to declare a final dividend of 7.3 cents per share. This was an increase of 5.8% year over year.

Overall, the business saw group net profit after tax (NPAT) fall 10.7% to $393.9 million due to net investment income falling from a $120 million gain in FY21 to a $24.8 million loss in FY22. However, the operating profit rose 12.5% to $594.1 million in FY22.

The full-year dividend was 13.4 cents per share, representing an increase of 5.5% compared to FY21.

Medibank's full-year dividend represented a payout ratio of 84.8% of underlying NPAT, normalising for investment market returns. This was at the top end of its target payout ratio range of between 75% to 85%.

At the current Medibank share price, this means it has an FY22 grossed-up dividend yield of 5.5%.

How big is the Medibank dividend expected to be in FY23?

Different analysts have different estimates for how much profit and how big the dividend may be from Medibank in the next couple of financial years.

For example, using the estimates on CMC Markets, Medibank is expected to generate earnings per share (EPS) of 18.4 cents in FY23 and 19.1 cents per share in FY24. This could translate into a dividend per share of 15.2 cents per share in FY23 and 15.8 cents per share in FY24. In percentage terms, this could mean a grossed-up dividend yield of 6.25% in FY23 and 6.5% in FY24.

Those dividend yields are pretty sizeable and would be attractive in my opinion. It could be a useful yield in this uncertain economic climate.

Let's have a look at a couple of the other estimates.

The broker Citi, which rates Medibank as a buy, thinks that Medibank could pay a grossed-up dividend yield of 6.5% in FY23 and 6.7% in FY24.

However, there are other estimates that put future dividends at a lower level. For example, Ord Minnett has projected that Medibank could pay a grossed-up dividend yield of 6.2% in FY23 followed by a grossed-up dividend yield of 6.6% in FY24.

Foolish takeaway

The private health insurer could generate a higher profit in FY23 with policyholder growth (projected by the company to be 2.7% in FY23). There could also be productivity improvements relating to management expenses and targeted organic or 'inorganic' growth. It's also possible that its investments could deliver gains again in FY23.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Broker says this ASX 200 biotech stock is a top buy

Let's see what Bell Potter is saying about this biotech.

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why CSL shares are a buy today despite the looming Trump tariffs

A leading expert believes CSL shares are still trading for a bargain today. Here's why.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Healthcare Shares

Why did the Telix share price just crash 16%?

Investors are sending the Telix share price plunging today. But why?

Read more »

Broker analysing the share price.
Healthcare Shares

Expert: 2 ASX healthcare stocks to avoid before reporting season

Not all healthcare stocks are created equal.

Read more »

A group of people in a corporate setting do a collective high five.
Healthcare Shares

Should I buy Pro Medicus or CSL shares ahead of earnings season?

The ASX healthcare sector may be currently undervalued.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Healthcare Shares

Why Mesoblast shares can keep storming higher

More big returns could be on the way for buyers of this high risk stock according to Bell Potter.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »