Ramsay Health Care Ltd (ASX: RHC, OTC: RMSYF) is Australia’s largest private hospital owner, and it has operations in the UK and France as well. It has 117 hospitals around the world, with around 10,000 beds, and employs approximately 30,000 people.

Twenty-two thousand doctors are attached to its service, and Ramsey is approaching 3 million patient days per year. All this put it in good position to capitalize on one of the surest trends alive, rising health care costs.

Most impressive about Ramsay is that it’s never failed–never–to boost its interim or its final dividend from one corresponding period to the next.

On Aug. 23, 2012, Ramsay followed through on this promise, announcing a 16.9 percent increase to its final fiscal 2012 dividend, to AUD0.345 per share from the AUD0.295 it paid for a final dividend in fiscal 2011. That brought the full-year dividend to AUD0.60, up 15.4 percent from the AUD0.52 per share it paid in respect of fiscal 2011.

Based on its consistent dividend growth and long-term prospects, St. Leonards, New South Wales-based Ramsay Health Care is a member of the AE Portfolio Conservative Holdings.

Ramsay maintained its dividend payout ratio of approximately 50 percent of core earnings per share fiscal 2012. A quicker-than-normal turnaround period for dividend payment means if you don’t already own the stock you won’t be entitled to this amped-up dividend.

But you can be as sure as you can of anything in this current market and economy that Ramsay will up its dividend by a double-digit percentage when it reveals first-half results for the current fiscal year around the third week of February 2013.

Ramsay posted core net profit after tax (NPAT) of AUD252.6 million during the 12 months ended Jun. 30, 2012, an increase of 14.5 percent, in line with analysts’ forecasts and management guidance. Another period of turning solid revenue gains into spectacular bottom-line results in its domestic operation and an improving top line in the UK during the second half of the year drove this double-digit increase.

The private hospital group reported a 23 percent increase in statutory NPAT to AUD244.1 million, up from AUD198.4 million in fiscal 2011. Revenue rose 6.3 percent to AUD3.96 billion from AUD3.7 billion.

Management guided to fiscal 2013 core NPAT and core EPS growth of 10 percent to 12 percent, which in light of recent patterns can be considered conservative, as it probably understates top-line improvements across all segments, and particularly management’s proven ability to develop and squeeze improvements–on costs and efficiencies–from the older hospitals in its portfolio, known as “brownfields.”

Ramsay’s core Australian and Indonesian operations generated revenue of AUD3.18 billion, up 7.7 percent from fiscal 2011. Patients treated in Australia increased by approximately 6 percent due to both organic growth and additional brownfield capacity.

Organic growth is underpinned by the prevalence of private health insurance plans in Australia, with 46.8 percent coverage of the Australian population as of Jun. 30, 2012, up 0.4 percent from Mar. 30, 2012. The Private Health Insurance Administration Council (PHIAC) reported this month that 132,000 Australians signed up for hospital coverage during the second quarter; about 10.6 million Australians now have this type of insurance.

Ramsay’s reported surgical mix continues to shift toward single-day procedures, which are increasing by approximately 2 percent per year. Management’s current estimate is that 62 percent of surgeries are being completed on a “day surgery” basis. This is contrary to PHIAC data that suggests patient length of stay is increasing.

But this contradiction is actually a good thing, at least from the view of looking at Ramsay as an investment. Ramsay’s day surgery procedures generate a lower price on insurance schedules but a higher margin. This trend toward day surgery is a long-term positive for Ramsay.

Ramsay’s fiscal 2012 revenue growth of 7.7 percent translated into 16.4 percent earnings before interest and taxation (EBIT).

In Australia EBIT margin improved by 90 basis points, due in parts to the mix shift toward more profitable day surgeries versus overnight stay, efficiency improvements and effective development of brownfield projects, where fixed costs are limited because the heavy investment in facilities and equipment have largely been made.

And management has been able to manage labor costs via its workforce sustainability program; nursing costs, in particular, have come down because Ramsay has moved away from the use of agencies for staffing, a relatively expensive proposition, and has driven this metric to a low in the company’s history.

Ramsay’s future growth depends on organic factors such as increasing patient visits, the strong trend toward day surgery, continuing to develop existing facilities and working with the public sector to generate more patient volume.

The latter in fact represents a significant opportunity. Public/private collaborations such as Ramsay’s contract with West Australia at the Joondalup Health Campus provide a good, successful model for other Australian states to follow. New South Wales seems interested in adopting a similar model, and Ramsay, given its experience, is well placed to participate.

In March 2011 Joondalup opened a AUD29 million Emergency Department and a AUD20.8 million, projects completed by the WA government and Ramsay in partnership. Ramsay operates Joondalup and treats public patients under a long-term contract with the state.

Since 2007 Ramsay has spent more than AUD900 million to expand capacity and improve facilities. Management expects such brownfield investment to average AUD100 million per year over the long term.

Ramsay committed AUD103 million to new brownfield projects in fiscal 2012, the most prominent the AUD47 million expansion of Greenslopes Hospital in Brisbane. This project brings new obstetric services along with 74 new beds and four surgical theaters and will be completed in mid-2013.

Ramsay’s commitment to the development of brownfield facilities is the key to its ability to turn this solid revenue growth into spectacular earnings growth. And this success is largely a matter of a disciplined management team that will only take on projects forecast to generate 15 percent returns on investment within three years.

There is some uncertainty on the horizon for Ramsay. Australia’s Fairer Private Health Insurance Incentives Act 2012 became effective on Jul. 1, 2012, the aim of which is to “implement three new Private Health Incentive Tiers” in order to reduce the amount of private health insurance rebate an eligible person with a complying private health insurance policy is entitled to when that person’s income exceeds the prescribed levy surcharge threshold under Australia’s Medicare system.

In other words, Australia will “means test” rebates to reduce costs.

Ramsay expects minimal impact in the short term, as management anticipates private policy holders to pre-pay for their coverage for next 12 to 18 months. Although there’s won’t likely be a large reduction in overall private health insurance coverage, there is some risk that individuals will opt out of some levels of coverage, which could impact the health insurers and their ability to absorb future costs.

Any consequences for the public health care system will be dealt with through new legislation. At any rate Ramsay, among global health care stocks, suffers relatively little regulatory pressure.

A positive regulatory development could come from the introduction of so-called activity-based funding in public hospitals. This fee-for-service type arrangement could reduce incentives for public hospitals to treat private patients, as the additional funding they’ve typically seen for doing so will dry up. Private hospitals such as Ramsay’s will be there to absorb these private patients.

Ramsay’s UK business improved during the second half of fiscal 2012 after underwhelming first-half results. Revenue for the six months to Jun. 30 grew by 5.5 percent in constant currency terms, reflecting strong admissions growth.

Underpinning this growth was an increase in admissions under the National Health Service’s Choose and Book system, which grew by 11.3 percent. NHS admissions now represent approximately 65 percent of Ramsay’s total UK admissions.

A decline in health insurance admissions was partially offset by a rebound in the self-pay market. Margins in the UK were basically stable over the fiscal year but fell by 40 basis points in the second half; though revenue was up by 5.5 percent earnings before interest, taxation, depreciation, amortization and rent (EBITDAR) growth was just 3.8 percent.

Margin weakness stemmed from the expiration of the UK business’ last premium-priced independent sector treatment center (ISTC) contract in November 2011. Though patient volumes have ticked back up these NHS volumes are predominantly of the low-tariff variety. Stable margins in this environment remain a good outcome.

Future volume will likely be driven by the UK’s Choose and Book system, which will limit Ramsay’s ability to replicate the kind of revenue-to-earnings magic it works at home.

A positive factor is the potential reform of the National Health Service. A new health bill in the UK aims to save GBP20 billion and should result in greater outsourcing of the NHS budget to the private sector. System reform that isn’t well funded could boost perceptions of declining quality, which in turn will boost demand for private health care.

Ramsay also operates on the Continent, in France. The French private hospital sector is demographically very similar to Australia and the UK. However, approximately 92 percent of Ramsay’s French revenue depends on the government. In light of economic pressures in the region management has no real expectation of growth in its reimbursement rate in the medium term.

The relevant operating unit, Ramsay Sante, posted flat margins during fiscal 2012, though in fiscal 2013 the acquisition of Clinique will actually cause some dilution, at least initially.

Ramsay’s strategy for France was to consolidate to get scale efficiencies, however this effort is on hold pending some fuller resolution of Europe’s economic plight. Management has noted that the performance of Ramsay Sante wasn’t that far outside its typical investment case but has also conceded that it hasn’t exactly matched expectations.

The opportunity to growth through mergers and acquisitions is on management’s agenda, though interest in the UK and France is not what it once was. The new apple of Ramsay’s eye could be China, where opportunities exist for health care services companies to set up shop with relatively minimal capital investment, in the manner of its brownfield experience in Australia.

In November 2011 Ramsay executed a new underwritten debt facility agreement of AUD2 billion. The facility allowed for the refinancing of the existing debt and provides significant room for Ramsay’s continuing brownfields program and developments, future acquisitions and working capital. The first facility draw down was made on Apr. 30, 2012.

There’s no fixed base for a private hospital operator. Each patient has to be cared for according to his or her own diagnosis, which can vary widely and require different nursing capabilities, different feeding and different types and degree of testing.

Ramsay’s Australian business is clearly the company’s engine of growth. Management has been able to replicate the type of solid-revenue-to-spectacular earnings numbers it posted for fiscal 2012 by adding extra capacity through brownfield developments, increasing admission throughput while reducing length of stay and controlling costs.

Ramsay Health Care, yielding 2.5 percent but with a consistently growing dividend rate, is now a buy on dips to USD26 on the Australian Securities Exchange (ASX) using the symbl RHC and on the US over-the-counter (OTC) market using the symbol RMSYF.

Ramsay’s fiscal year runs from Jul. 1 to Jun. 30. The company reports full financial and operating results twice a year; it typically posts first-half results in late February, with full fiscal year numbers out in late August.

As noted above, Ramsay’s board approved and management declared a final dividend of AUD0.345 per share on Aug. 23, 2012. It will be paid Sept. 26, 2012, to shareholders of record as of Sept. 7, 2012. Shares traded “ex-dividend” on this declaration as of Sept. 3, 2012.

An interim dividend of AUD0.255 was paid Mar. 28, 2012, to shareholders of record on Mar. 9, 2012. It was declared Feb. 23, 2012, when the company reported results for the first half of fiscal 2012. Shares traded ex-dividend on Mar. 5.

Dividends paid by Ramsay are “qualified” for US tax purposes. The Australian government withholds 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.

Among the analysts who cover the stock, just one rates it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology. There are eight “hold” and two “sell” ratings on the stock at present, the latter advice based largely on valuation concerns. The “best consensus” 12-month target price among the nine analysts that provide such a number is AUD23.05, with a high of AUD25.00 and a low of AUD19.28.