The healthcare industry has been one of the most successful industries for investors over the last few years and I think every investor would benefit from having one or more of these quality companies in their portfolio.
Ramsay Health Care Ltd (ASX: RHC)
Ramsay has been one of the best performing stocks on the ASX for a long time; it's up over 416% in the last five years. Ramsay has private hospitals in Australia, the UK, France, Malaysia and Singapore with ambitions to expand into other countries, such as China.
At $15.8 billion in size, Ramsay isn't small but I think it still has a large growth runway. The aging population tailwinds will help Ramsay for decades and there are many countries that Ramsay can expand into.
Using analysts' estimates, Ramsay's FY18 earnings per share are forecasted to be 298.4cps with a dividend of 157.7cps (source: Commsec). This suggests Ramsay shares are currently trading at 26x FY18's estimated earnings with a forward grossed up dividend yield of 2.9%. Now could be a great time to buy for the long-term investor.
Healthscope Ltd (ASX: HSO)
Healthscope is the second largest operator of private hospitals in Australia and is a competitor to Ramsay. There is plenty of room in Australia for both of them to thrive. Healthscope has a pipeline of hospitals that it is constructing, which will fuel growth over the coming years.
Healthscope is $5.1 billion in size, a third of the size of Ramsay. Being smaller helps, as each new hospital adds a bigger percentage to Healthscope's earnings.
Looking ahead, analysts are estimating that by FY18 Healthscope will increase its earnings to 12.8cps and its dividend to 8.8cps. This means Healthscope shares are trading at 23x FY18's estimated earnings with a forward dividend yield of 2.98%. It could also be a good buy for the long-term investor.
Medibank Private Ltd (ASX: MPL)
Medibank is Australia's largest private health insurer, with its Medibank and AHM brands. Since listing at $2 in July 2014, Medibank has risen by 28.5% to today's price of $2.57.
Investing in a health insurance company is a great way to get diversification in the health industry, as consumers are insuring for all their potential health needs. Compare this to companies such as ResMed Inc. (CHESS) (ASX: RMD) or Cochlear Ltd (ASX: COH) which are focused on only one health issue.
Another bonus for Medibank is that the Australian government wants the private health insurance industry to succeed as it reduces the reliance on the public health sector. The government encourages people to get insurance with the health insurance rebate, the Medicare levy surcharge, and lifetime health cover loading.
Analysts estimate that by FY18 its earnings per share will be 16.5cps and it will pay a dividend of 12.2cps. This suggests Medibank is trading at 15.5x FY18's estimated earnings with a forward grossed up dividend yield of 6.9%. This could be a good time to buy for the patient investor.
Foolish takeaway
The health industry continues to be one of the best performing sectors and could continue to be in the foreseeable future. The aging population tailwinds, combined with people's desire to remain healthy and alive should see the above three companies grow over the years.
