If you're an income investor, you may be wondering if NIB Holdings Limited (ASX: NHF) shares would be a good option for your portfolio.
Well, the team at Goldman Sachs has been running the rule over the health insurance giant recently and it has only good things to say about the company.
Why NIB shares could be a buy
According to a recent note, the broker likes the health insurer for a few key reasons.
The first is its defensive qualities. It highlights that NIB "offers defensive exposure to the private health insurance sector which is experiencing favourable operating trends."
In addition, Goldman believes that operating conditions are favourable for the company. It notes that the "claims environment remains low with no immediate indications of a bounce back in claims."
Another reason it is positive on NIB shares is that "significant policyholder give back incentives suggest claiming environment remains well below expectations."
And finally, it is expecting a "strong recovery in non-resident volume post Covid-19 through the return of international students, workers and visitor arrivals."
The broker summarises:
We currently have a preference for NHF in this space reflecting strong underlying top line growth through policyholder growth and premium rate increases, shareholder-friendly interpretation to not profit from Covid-19, while offering greater diversity of earnings outside of regulated resident health insurance.
But what about income?
Goldman is also expecting growing dividend yields in the coming years, which could be very attractive to income investors.
It is forecasting fully franked dividends per share of 29 cents in FY 2024, 33 cents in FY 2025, and then 35 cents in FY 2026. Based on the current NIB share price of $7.52, this will mean yields of 3.85%, 4.4%, and 4.65%, respectively.
Goldman has a buy rating and $8.40 price target on NIB's shares.
