Raffles Medical Group shares are up 17% year to date.
It recently raised dividends to 2.5 cents per share, up from 2.4 cents per share the previous year.
What’s more, the company also revised its dividend policy – committing to paying out at least 50% of its annual profits.
Readers have asked me if Raffles Medical Group is worth buying today for dividends?
Well, let’s dive in!
The last time I wrote Raffles Medical Group here.
Raffles Medical’s positive 2H2024 results
First things first, Let’s take a look at Raffles Medical Group’s 2H2024 numbers:
- Revenues grew 14% y/y to S$385 million
- Net profit increased 2.2% y/y to S$31 million
- Adjusted net profit (excluding unrealized investment property losses) rose 38% y/y to S$31.6 million
Results look good. This was despite fewer government grants and removal of COVID-19 services in 2024.
I’d say its strong results indicate the ongoing, big demand for high-quality healthcare services in Singapore.
In fact, Raffles Medical Group’s gross margins continued to improve over the last couple of years.
This also shows Raffles Medical Group’s reputable brand in the healthcare industry.
Here’s where it gets interesting.
Raffles Medical Group’s China hospitals, including the ones in Beijing, Shanghai and Chongqing all all reported a 10% revenue growth, hitting ~S$65 million.
What’s more, its Beijing hospital also turned profitable, which reflects a crucial milestone.
Over the past years, RMG has expanded across 14 Chinese cities, and the increasing patient flow into its hospitals suggests that the Raffles Hospital brand is gradually gaining recognition in China.
That’s a big plus point.
So… is it worth buying Raffles Medical Group for dividends today?
The China Challenge
Singapore is still Raffles Medical Group’s biggest market.
But China is the real battleground for true profit growth.
The thing is, healthcare in China is vastly different. You see, China’s healthcare sector is dominated by public hospitals, which receive government subsidies, making private hospitals a more expensive alternative.
As a result, Raffles Medical has struggled to gain traction in China for a long term.
Having said that, one of Raffles Medical’s biggest strengths is its ability to produce healthy, positive free cash flow.
Over the years, this allowed it to accumulate a war chest of S$343 million, keep a clean balance sheet and minimal debt.
Raffles Medical’s steady 2-3% dividend yield
The bigger plus point is this: Raffles Medical Group’s Raffles Medical Group has a track record of paying steady dividends.
Over the past decade, its dividend payout has ranged from 2 to 3 cents per share annually.
This makes it a consistent dividend payer. But it also translates to a dividend yield of only 2-3%.
For some investors, this yield is acceptable, given the hospital operator’s stability and long-term growth potential.
Raffles Medical’s rising dividend payout
However, dividend investing is also about opportunity cost. You see, Raffles Medical Group can raise its payout over time. While the company has committed to a higher dividend payout ratio (now 50% of profits), its actual dividend growth has been slow.
In the past two years, the average payout ratio rose to 75%, indicating that the company is using a larger portion of its profits to sustain dividend payments.
If you ask me, investors need to consider whether their capital could generate higher returns elsewhere.
My final thoughts — would I buy Raffles Medical for dividends?
Honest thoughts – Raffles Medical Group is a good dividend payer if you like a steady, safe dividend payer with no high dividend yield requirements. The thing is, future dividend growth will rest on Raffles Medical’s China segment.
Don’t forget, Raffles Medical is still investing heavily in China, yet returns have been slow to materialize.
Its China segment currently contributes less than 20% of revenues, even though it holds significant growth potential given China’s 1.3 billion population.
Which means, this key driver of Raffles Medical Group’s future success in China will be the growing demand for high-quality healthcare in major cities, especially as China faces an aging population.
If Raffles Medical can take advantage of this trend, improve profitability in its China operations, it could drive stronger earnings and higher dividends over time.
And this is where I’d focus on for dividends.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
