There are not many ASX stocks that can point to a dividend history of increasing the payout almost every year of the past decade, aside from the COVID-hit year of 2020. That payout record does describe Medibank Private Ltd (ASX: MPL), which has delivered pleasing dividend growth in the last 10 years.
Medibank is the largest private health insurer in Australia, with its Medibank and ahm brands.
Healthcare is a good industry to be invested in because of the defensive and consistent nature of demand, the ageing population tailwind, and the fact that Australia's population growth means more potential policyholders.
Let's take a look at how good the passive income from the ASX stock could be in 2026.
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Passive income potential
The company's board of directors decided on a dividend payout ratio of 80.1% of underlying net profit after tax (NPAT) in FY26. It's 'underlying' because it normalises for investment market returns and any movement in the COVID-19 equity reserve.
Medibank typically targets a dividend payout ratio of between 75% to 85% of underlying net profit after tax.
The FY25 payout of 18 cents per share was 8.4% higher than the FY24 dividend. That means that the current Medibank grossed-up dividend yield is 5.5%, including franking credits.
But, those dividends are history. It's the future payments that are important.
The forecast on Commsec suggests the business could increase its passive income payment by 11.1% to 20 cents per share in FY26. At the current Medibank share price, that translates into a grossed-up dividend yield of 6.1%, including franking credits, which is a pleasing level of income.
$200 per month of passive income
Medibank doesn't pay a dividend every month, it pays every six months. So, it's better to think of the target as an annual goal.
$200 per month translates into $2,400 per year of passive income, excluding the franking credits.
To reach that level of dividends from the ASX stock, we'd need to own 12,000 Medibank shares.
Pleasingly, the prediction on Commsec suggests the annual dividend could rise again in FY27 to 21 cents per share.
Is growth likely in FY26?
The business is expecting growth across its key metrics in FY26.
For resident health insurance, it's anticipating lower industry growth than FY25, but indicated growth nonetheless. It's aiming to grow its policyholder market share in a "disciplined way", including further volume growth in the Medibank brand.
For its non-resident health insurance, the ASX stock is aiming to maintain solid gross profit growth.
With its Medibank health segment, it's expecting low-double digit organic operating profit growth.
Using the projection on Commsec, the ASX stock is valued at 19x FY26's estimated earnings. I think that looks quite appealing for a growing, defensive business.
