Is Ramsay Health Care Limited (ASX: RHC) the best ASX share to buy for dividends? With a grossed-up dividend yield of 3.2% you wouldn't think it could count as a great dividend share.
Since the start of 2015 its share price has only gone up by about 15%, but its dividend has gone up by 50%. In the latest result of FY19, Ramsay announced that its FY19 dividend was up 5.2% compared to FY18.
It's the dividend growth that makes Ramsay such an interesting idea for income. Ramsay has grown its dividend every year since 2000. The only other ASX share to have done that is investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
Ramsay has focused on growing its business and earnings whilst also rewarding shareholders along the journey with growing dividends. If investors can be patient by not focusing on the starting dividend yield they will benefit over the longer-term as the income payment gets bigger and bigger.
The private hospital operator is exposed to the excellent ageing population tailwind in Australia and Europe. Ramsay has supercharged its earnings with acquisitions (such as the recent Capio deal in Europe), expanding existing hospitals and building new hospitals.
What I particularly liked hearing from Ramsay management recently is that the company is looking to make add-on acquisitions that would allow it to provide more services to patients outside of the hospital.
There is a push to reduce healthcare costs by the government, particularly by encouraging patients to have more in-home care. If Ramsay becomes a more diversified healthcare business it could make it less reliant on private hospital visits, which is somewhat dependent on private health insurance remaining a viable option for a lot of Australians.
Foolish takeaway
Ramsay is trading at 21x FY21's estimated earnings. I don't think Ramsay looks like a bargain, but with interest rates a lot lower than they were before I think Ramsay looks more attractive, particularly from an income perspective.
