Medibank Private Ltd (ASX: MPL) stock has had a solid 2024, rising by 6.4% to date. That's only slightly less than the S&P/ASX 200 Index (ASX: XJO)'s return of 7.5%. I think there are a few factors that could make Medibank an interesting investment option.
This company is best known for its Medibank and ahm private health insurance brands. It offers services for several other categories, including overseas students, visitors, and people on working visas, as well as travel insurance, pet insurance, life insurance, and income protection.
Its private health insurance generates the most profit, while its investment earnings are also important. The company invests the money received from premiums until it needs to be paid out.
There are three factors that I think make Medibank stock an intriguing idea.
Defensive and growing earnings
Healthcare can be one of the most defensive sectors, depending on the specific product or service that the company provides.
Australians need to pay their premiums to keep their private healthcare coverage. Many Aussies place a high importance on their health and access to services that they want, which supports demand for Medibank.
It's not surprising that Medibank's policyholder numbers keep growing, considering the company's market-leading position in the country and the fact that Australia's population continues to increase. In FY24, Medibank's net resident policyholders grew by 14,400 (or 0.7%), and net non-resident policy unit growth was 69,000 (or 25.1%). This helped the health insurance operating profit grow by 6.3% to $692.3 million.
Good dividend yield
The business is paying a pleasing and growing dividend to investors, which helps boost the dividend yield with Medibank stock.
In FY24, the company grew its dividend per share by 13.7% to 16.6 cents. At the current Medibank share price, that translates into a grossed-up dividend yield of 6.2%, including franking credits.
According to the forecast on Commsec, the business is projected to grow its dividend per share by a further 11.4% to 18.5 cents per share in FY25. That translates into a forward grossed-up dividend yield of 6.9%, including franking credits.
Compelling Medibank stock valuation
The price-earnings (P/E) ratio of many growing businesses on the ASX has soared in the last 12 months.
I think Medibank shares offer a compelling earnings multiple, considering the company's profit is projected to continue growing.
The forecast on Commsec suggests Medibank's earnings per share (EPS) could grow in the double-digits in percentage terms to 23 cents. This would put the Medibank share price at under 17x FY25's estimated earnings.
If Medibank's EPS and dividend continue rising in the years ahead – which certainly isn't guaranteed – I think Medibank stock could be a good-performing investment.
