3 reasons why I think NIB shares could still be a buy

NIB has a lot of things going for it.

| More on:
ASX share price movement represented by doctor pressing digitised screen with array of icons including one entitled health insurance,

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

The NIB Holdings Ltd (ASX: NHF) share price has had a rather successful year so far in 2023. Since the start of the year, NIB shares have risen a pleasing 9.07%, going from $7.61 each to Monday's market close price of $8.30. 

That compares favourably against the S&P/ASX 200 Index (ASX: XJO), which is up around 5.19% over the same period:

Created with Highcharts 11.4.3NIB Holdings + S&P/ASX 200 Price Return (AUD) PriceZoom1M3M6MYTD1Y5Y10YALL0www.fool.com.au

NIB shares are also up 13.85% over the past 12 months. 

But this ASX 200 insurance provider could still be worth a buy today, despite the gains the company has already booked over the past seven months or so. Here are three reasons why.

3 reasons that NIB shares could still be a buy today

NIB shares: A major player in a government-supported industry

Most Australians would be at least somewhat familiar with private health insurance and its role in our healthcare system. NIB is a major provider of private health insurance services in Australia, with around a 9.4% market share.

Private health insurance is one of the few products that the government pushes customers into. If you earn above a certain income threshold, you could get penalised with extra tax bills if you don't hold an eligible policy.

Few companies can say that the government actively heard customers their way. But NIB can, making it a compelling reason to consider this company in my view.

A company with strong fundamentals

The best ASX shares tend to display an ability to grow revenue, earnings and profits at a compounding rate over time. NIB has shown it has what it takes to deliver in this arena. Its most recent half-yearly earnings report, covering the six months to 31 December 2022, revealed a 9.3% increase in revenues to $1.5 billion.

Earnings per share (EPS) was up by an even rosier 12.4% to 20 cents, while NIB's net profit after tax (NPAT) metric rose 12.8% to $91.6 million. This all enabled NIB to jack up its interim dividend by 18.2% to 13 cents per share, fully franked.

Dividend potential

Speaking of dividends, NIB is one of ASX's best companies if you want dividend income from the healthcare sector. For one, the company currently sports a robust trailing dividend yield of 2.9%, which comes fully franked.

That's a fairly decent dividend yield on the ASX today, especially from a healthcare stock. But NIB shares have also shown an ability to increase their dividends over time. We've already noted that this year's interim dividend was a pleasing 18.2% hike over what investors received last year.

It's also important to consider that the 24 cents per share that shareholders bagged in 2021, as well as the 22 cents per share that were paid out in 2022, were massive increases over the 13 cents per share investors got in 2019, and the 14 cents per share doled out in 2020. And back in 2012, shareholders received just 4.3 cents per share.

So the dividends from NIB are certainly going in the right direction.

Motley Fool contributor Sebastian Bowen 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 recommended NIB Holdings. 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 man wearing a white coat and glasses is wide-mouthed in surprise.
Healthcare Shares

Guess which ASX 300 stock is crashing 55% today

What's going on with this stock? Let's see why investors are hitting the sell button.

Read more »

Woman serving customer in pharmacy.
Healthcare Shares

Up 132% in a year, are Sigma Healthcare shares still a good buy post the Chemist Warehouse merger?

After gaining 132% in 12 months, it too late to buy Sigma Healthcare shares today?

Read more »

Three scientists wearing white coats and blue gloves dance together in a lab.
Share Market News

Is it too late to buy Pro Medicus shares?

Pro Medicus shares have risen 550% over 3 years. Have you missed the boat? Three experts weigh in.

Read more »

Researchers and doctors with futuristic 3d hologram overlay for body anatomy or dna in hospital clinic.
Healthcare Shares

These 5 ASX 200 healthcare shares gained the most weight in FY25

These stocks were in great health last financial year.

Read more »

Scientists working in the laboratory and examining results.
Healthcare Shares

Guess which ASX 300 healthcare stock is charging higher on product launch news

Investors have responded positively to this announcement.

Read more »

Three healthcare workers look and point at at medical image
Share Market News

Pro Medicus shares surge 10% to crack $300 as healthcare leads ASX 200 sectors

Pro Medicus shares just keep on going, rising 625% over the past three years.

Read more »

Shot of a mature scientists working on a laptop in a lab.
Healthcare Shares

Here are the latest growth forecasts for the CSL share price

Can this biotech giant deliver healthy returns?

Read more »

Three scientists wearing white coats and blue gloves dance together in a lab.
Healthcare Shares

UP 127% in a year, why is the Pro Medicus share price rocketing higher again today?

ASX investors are sending Pro Medicus shares flying higher on Thursday. But why?

Read more »