Own Medibank shares? Here's why it's a rewarding day for you

Shareholders are getting a healthy boost today.

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Anyone who owns Medibank Private Ltd (ASX: MPL) shares today and has held them since 28 February 2024 is getting a useful boost today.

A few weeks ago the company reported its FY24 half-year result, which came with a number of pleasing positives.

One of the main things shareholders can take from the half-year report is a nice, big dividend.

Medibank pays its dividend

The board of directors for Medibank decided to declare a fully franked interim dividend of 7.2 cents, which is being paid today. That represented an increased payout that was 14.3% bigger than last year.

Medibank's payment equated to a dividend payout ratio of 75.5% of underlying net profit after tax (NPAT). This measure 'normalises' for investment market returns. The company has an annual target payout range of between 75% to 85% of underlying NPAT.

At the current Medibank share price, this payout represents a grossed-up dividend yield of 2.7%.

Growth reported

The HY24 result was solid enough – group revenue from external customers increased 3.3%, while health insurance operating profit rose 4.3% to $317 million. Underlying NPAT rose 16.3% to $262.5 million and statutory net profit grew 103.2% to $343.2 million. Part of the profit increase was because of a 49.6% jump in net investment income.

Medibank reported its net resident policyholders grew by 3,400 (or 0.2%), while net non-resident policies grew by 33,800 (or 12.3%).

Future profitability will be key for ensuring the Medibank dividend can keep rising. It's expecting a "moderation in resident industry growth" in FY24 compared to FY23. The business is aiming to achieve between 1.2% to 1.5% resident policyholder growth in FY24. It's expecting a return to market share growth in the second half of FY24.

Projected Medibank dividend yield

According to the estimate on Commsec, owners of Medibank shares could get a grossed-up dividend yield of 6% in FY24.

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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