According to projections, Medibank Private Ltd (ASX: MPL) investors are likely to enjoy a good dividend yield in the next 12 months based on the current Medibank share price of $3.79.
Medibank is the largest private health insurer in Australia through its two brands, Medibank and Ahm. This approach allows it to offer both full-service and discounted private health insurance to Australians.
I think it's worthy of attention from passive income investors for two key reasons – the dividend and the growing earnings.
Let's explore why this ASX dividend share could be appealing, starting with the payout.
Large and growing dividend with Medibank shares
Quite a few ASX companies pay large dividends, and some have a record for hiking their shareholder payments year after year. Medibank can provide a mix of those two elements, which is something I like.
The ASX healthcare share has been listed on the ASX for just over a decade. Aside from the COVID-hit 2020 year, Medibank has grown its dividend payout every year since 2015. That's a solid record, in my view.
According to the projection on Commsec, it could pay an annual dividend per share of 18.5 cents. At the current Medibank share price, that would be a fully franked dividend yield of 4.9% and a grossed-up dividend yield of 7%, including franking credits. That's a solid near-term yield, in my view. More dividend growth is expected in FY25.
Rising earnings
Rising earnings are a key factor in a good ASX dividend share, in my view. Growing profit helps fund the current dividend and can drive the dividend higher.
In the FY24 result, Medibank reported a 14.1% rise in underlying earnings per share (EPS) to 20.7 cents, and this helped the dividend per share grow to 16.6 cents.
The forecast on Commsec suggests EPS could rise to 23 cents, which would mean profit going in the right direction.
In its FY24 results, Medibank advised that it expected slower industry growth in FY25 compared to FY24.
In terms of Australian resident health insurance customer growth, the company said it would remain "disciplined" as it aimed to grow in line with the market in FY25, including volume growth with the Medibank brand. It will target market share growth in FY26.
However, regarding non-resident health insurance, it expects "solid" policy unit growth to continue in FY25. This grew by 25.1%, or 69,000, in FY24.
The company is targeting $10 million of productivity savings in FY25 and expects claims per policy unit growth of around 2.7%.
Overall, it looks positive that the business could grow both earnings and dividends in FY25. That may also be good news for the Medibank share price this year.
