Yahoo Finance Medibank Private's (ASX:MPL) Upcoming Dividend Will Be Larger Than Last Year's
Medibank Private Limited's (ASX:MPL) dividend will be increasing to AU$0.069 on 30th of September. Based on the announced payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.
View our latest analysis for Medibank Private
Medibank Private's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend made up a very large portion of earnings and also represented 80% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.
Over the next year, EPS is forecast to fall by 4.3%. If recent patterns in the dividend continue, we could see the payout ratio reaching 92% in the next 12 months, which is on the higher end of the range we would say is sustainable.
Medibank Private Is Still Building Its Track Record
Medibank Private's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 6 years was AU$0.053 in 2015, and the most recent fiscal year payment was AU$0.13. This means that it has been growing its distributions at 16% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
Medibank Private May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Medibank Private's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Slow growth and a high payout ratio could mean that Medibank Private has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.
Our Thoughts On Medibank Private's Dividend
Overall, we always like to see the dividend being raised, but we don't think Medibank Private will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Medibank Private that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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