Shareholders of Medibank Private Limited (ASX: MPL) may be wondering how large the Medibank dividend and dividend yield is going to be in 2022.
For readers who don't know, Medibank is the largest private health insurance business on the ASX. It operates through the brands Medibank and AHM. At 30 April 2022, Medibank had 1,932,000 resident policyholders.
How big is the 2022 Medibank dividend going to be?
Let's start with what we already know.
Medibank's board decided to declare an interim dividend of 6.1 cents per share for the first half of FY22. This represented a dividend payout ratio of 79.1% of the underlying earnings per share (EPS). In HY22, the dividend was increased by 5.2% while the underlying EPS rose by 4.4%.
According to estimates at Commsec, Medibank could pay an annual dividend per share of 13.1 cents in 2022. That translates into a projected grossed-up dividend yield of 5.9% at the current Medibank share price.
Commsec numbers imply further growth of the Medibank dividend in the coming years. In FY23, Medibank is expected to pay an annual dividend of 14 cents per share and then 14.4 cents in FY24. That equates to forward dividend yields of 6.3% and 6.5%.
The broker Citi is expecting an even bigger dividend from Medibank. It thinks the private health insurance ASX share could pay a grossed-up dividend yield of 6.1% in FY22 and 6.5% in FY23.
What progress is Medibank making?
The company recently said at an investor conference that private health insurance participation growth remains "strong".
Medibank said there has reportedly been a shift in customer attitudes towards private health insurance. The company claims private coverage is seen as attractive "given concerns about public hospital wait times". It's also seen as more affordable and better value than in the past, which is supporting improved retention.
Medibank noted that there has been six consecutive quarters of industry policyholder growth. Rolling 12-month policyholder growth increased from 2.68% in September 2021 to 2.79% in December 2021. The company said that new-to-industry and younger cohorts are "major contributors" to the growth, which Medibank suggested shows positive signs for industry sustainability.
The industry participation growth is expected to be higher than pre-pandemic levels over the medium-term. However, management said affordability is still key to maintaining growth.
Outlook comments can have an influence on the Medibank share price and may give an indication of business performance. This could also provide some guidance on profitability and the Medibank dividend.
In FY22 to April 2022, the business has seen resident policyholder growth of 2.3%. It's aiming to see policyholder growth of between 3.1% to 3.3%, including continued growth in the Medibank brand.
The underlying average net claims expense per policy unit is forecast to be approximately 2.3% among resident policyholders in FY22.
Is the Medibank share price a buy?
Citi currently rates the business as a buy, with a price target of $3.65. That implies a potential rise of the Medibank share price of more than 10% over the next year.
The broker noted that the ASX share could make acquisitions.
