Should you buy Medibank (ASX:MPL) shares in July for the dividend?

Is Medibank a dividend buy today?

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Should you consider the Medibank Private Ltd (ASX: MPL) share price in July 2021 for the dividend yield?

Private health insurance giant Medibank has amassed a reputation as a heavyweight ASX dividend share ever since its 2014 transition from government-owned entity to public company.

In fact, the company had been steadily ramping up its dividend payments until the coronavirus crisis came to our shores last year. From 2015 until 2019, Medibank increased its dividend payouts every single year like clockwork.

But Medibank was indeed forced to trim its payouts last year. In 2019, the company paid out three dividends. These consisted of a single interim payment of 5.7 cents per share, and a final and special dividend of 7.4 cents and 2.5 cents per share respectively.

What kind of dividends are Medibank shares offering today?

In 2020, Medibank kept its March interim dividend at 5.7 cents. However, it was forced to trim its September final dividend down to 6.3 cents per share.

In 2021 so far, the company has paid an interim dividend of 5.8 cents per share. That’s a slight bump to its last two interim dividends.

These dividend payments give Medibank shares a trailling yield of 3.64% on current pricing. That rises to 5.21% grossed-up with the company’s usual full franking.

It’s not yet certain what Medibank’s final dividend will look like when it gets delivered to shareholders’ bank accounts in September this year. But investment bank Goldman Sachs has a prediction.

Goldman estimates Medibank will pay out 12.6 cents per share in dividends for FY21, which means it is anticipating a final dividend of 6.8 cents per share. That would give Medibank shares a forward yield of 3.81% on current pricing.

Further, in some good news for those income investors who appreciate a steadily rising dividend, Goldman is predicting Medibank will be able to resume its pattern of annual dividend increases. It anticipates the company’s dividend will reach 13.3 cents per share by FY2023.

It’s worth noting that Goldman currently has a ‘neutral’ rating on the Medibank share price. With a 12-month price target of $3.34 a share, that’s just 0.9% above the share price Medibank closed at yesterday.

At this share price, Medibank has a market capitalisation of $9.14 billion, with a price-to-earnings (P/E) ratio of 25.34.

Should you invest $1,000 in Medibank Private right now?

Before you consider Medibank Private, you'll want to hear this.

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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 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 Bruce Jackson.

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