Favorable demographics support operations at home: A doubling in the proportion of Australians older than 65 is set to underpin earnings for health care companies in the longer term, as beyond that age people become large consumers of health-care services.

Evolving policy in key developed markets promises short-term headwinds as companies adjust to efforts to reduce public spending.

But over the longer term policies that increase the number of insured patients should result in rising volumes.

And growing incomes and awareness in key emerging markets that neighbor Australia provide significant opportunities for growth, particularly in the private health sector, which is growing rapidly in emerging-market countries.

Across the developing world, population growth, increasing life expectancy, growing disease burdens and patients’ demand for treatment are driving reliance on private health care companies.

AE Portfolio Conservative Holding Ramsay Health Care Ltd (ASX: RHC, OTC: RMSYF) is a legitimately global operator with a geographically diverse portfolio of hospitals across five countries.

The recently completed acquisition of France-based Générale de Santé (GdS) cements Ramsay’s position in the top five private hospital operators in the world.

Ramsay, which operates private hospitals in Australia, Indonesia, England in addition to France, is well positioned to grow earnings and dividends based on these trends.

Management continues to pursue an aggressive growth plan, focused on upgrading existing facilities and expanding capacity in Australia and concentrating its acquisition efforts in Europe and Asia. At the same time, gearing remains well under control, with net debt-to-earnings before interest, taxation, depreciation and amortization flat at 1.6 times.

Ramsay reported fiscal 2014 revenue growth of 17.6 percent to AUD4.9 billion, helped by overseas acquisitions, while earnings before interest and taxation (EBIT) were up 19.6 percent to AUD580.4 million.

Core net profit after tax (NPAT) was up 19 percent to AUD346.2 million, and earnings per share (EPS) rose 20.6 percent to AUD1.64.

Statutory NPAT of AUD303.8 million was up 14 percent.

Continuing strong operating cash flow and effective working capital management delivered a high cash conversion rate of more than 100 percent of EBITDA to gross operating cash flow.

During the year Ramsay took the opportunity to access favorable debt markets, executing an extension of its existing debt facilities to July 1, 2017, and May 1, 2019, for the three- and five-year facilities, with improved pricing and terms.

Ramsay’s strong balance sheet and strong cash flow generation provides the flexibility to fund the increasing brownfield capacity expansion program, future acquisitions and ongoing working capital needs.

Results beat consensus expectations for both revenue and earnings.

Ramsay declared a final dividend of AUD0.51, up 22.9 percent on the prior corresponding period. The company’s interim dividend was up 17.2 percent to AUD0.34. Overall dividend growth for fiscal 2014 was 20.6 percent.

Australia/Asia revenue grew by 10.5 percent to AUD3.8 billion, with earnings before interest and taxation (EBIT) up 14.8 percent to AUD480.2 million.

Margin in Australia increased by 30 basis points to 19.1 percent, as the leverage inherent in Ramsay’s brownfield development program was once again made apparent.

UK revenue was up 4.7 percent to EUR382.7 million, supporting EBIT growth of 11.1 percent to EUR35.3 million.

Ramsay saw a substantial increase in National Health Service admissions due to the UK government’s concerted attempt to manage waiting times. This factor will support similar growth in fiscal 2015.

More than 70 percent of Ramsay’s UK hospital admittances are now NHS-related. Despite an increase in low-margin admittances, Ramsay managed to increase UK margin by 20 basis points.

Jill Watts, who runs Ramsay Health Care UK, was recently poached by Netcare Ltd (Johannesburg: NTC, OTC: NWKHF, ADR: NWKHY) to run its UK-based subsidiary General Healthcare Group. Ms. Watts will assume her new role on Nov. 17, 2014.

This as a negative for Ramsay, as Ms. Watts led the UK unit through a period where lucrative government contracts were maturing. Keeping margins growing was a big achievement especially as the business shifted toward lower-tariff NHS work.

But growth in Europe will be supported by France and the synergies management will squeeze from recent acquisitions.

The UK business represented 10.5 percent of overall EBIT during fiscal 2014. But this will be significantly diluted by the contribution of the Générale de Santé business in fiscal 2015.

In France, revenue surged by 85.6 percent, driven by acquisitions completed during fiscal 2013, to EUR323.5 million. EBIT were up 85 percent to EUR26.2 million.

Ramsay Santé showed continued improvement of its existing operations, while the contribution from the Clinique de l’Union (acquired in June 2013) and the Medipsy psychiatric facilities (acquired mid-December 2013) also boosted the top and bottom lines.

Results in the UK and in France demonstrate clearly the excellent growth opportunities that exist in European markets for experienced hospital operators.

On July 1, 2013, Ramsay commenced its joint venture with Sime Darby Berhad. The JV, which combines Sime Darby’s portfolio of health care assets in Malaysia (three hospitals and a nursing and health sciences college) with Ramsay’s three Indonesian hospitals, has been successfully integrated.

The acquisition of Générale de Santé and its 61 hospitals (combined with the December 2013 acquisition of GdS’s 30 Medipsy facilities) will make Ramsay the largest private hospital operator in France–a country that has a strong, well-respected health system with a growing demand for health care service–and will drive future earnings growth.

The transaction is expected to be immediately accretive to EPS accretive.

During fiscal 2014 Ramsay approved a further AUD172 million for capacity expansions in Australia.

Brownfield developments approved at major hospitals including St George, Lake Macquarie, Pindara, Beleura and Peninsula Private Hospitals are expected to drive admissions growth in these hospitals, which are located in high-growth areas.

Management has a strong track record of expanding hospitals to meet demand over the past decade.

Ramsay also opened the Sunshine Coast University Private Hospital, which has a public services contract for five years with Queensland Health. In its first six months of operation the hospital admitted over 8,000 patients.

Ramsay also re-contracted with the Victorian state government to operate the Mildura Base Hospital until 2020, and it tendered a proposal for the Northern Beaches Hospital with the New South Wales government.

Peel Health Campus, a public hospital in Western Australia acquired in June 2013, has been successfully integrated. Management has plans for further development of both public and private facilities at this campus in the near future.

Brownfield developments and prudent acquisitions, the hallmarks of Ramsay’s growth strategy, will remain priorities for the company in fiscal 2015, while it maintains focus on improving performance at its existing hospitals.

Management guided to fiscal 2015 core NPAT and EPS growth of 14 percent to 16 percent.

We expect more upside for the share price, and we expect more dividend growth.

Ramsay Health Care is a buy under USD52 on the Australian Securities Exchange (ASX) using the symbol RHC and on the US over-the-counter (OTC) market using the symbol RMSYF.

Ramsay Health Care closed at AUD49.68 on the ASX on Oct. 9. Based on the prevailing exchange rate as of this writing, that’s USD43.68 in US dollar terms.

Ramsay Health Care’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.

Interim dividends are usually declared in February, along with financial and operating results for the first half of the fiscal year, with payment typically made a month later, in March. Final dividends are usually declared in August, along with fiscal year results, with payment made in September.

Ramsay’s final dividend in respect of fiscal 2014 of AUD0.51, declared on Aug. 28, 2014, was paid on Sept. 24, 2014, to shareholders of record on Sept. 10. Shares traded ex-dividend on this declaration as of Sept. 8.

The fiscal 2014 final dividend was up 22.9 percent from the final dividend paid for fiscal 2013.

The most recent interim dividend of AUD0.34 per share was declared Feb. 25, 2014. It was paid March 26, 2014, to shareholders of record as of March 11. Shares traded ex-dividend on this declaration as of March 4.

The fiscal 2014 interim dividend was up 17.2 percent from the interim dividend paid for fiscal 2013.

Management will declare the interim dividend for fiscal 2014 on or about Feb. 24, 2015, when it reports financial and operating results for the first six months of the current financial year.

Dividends paid by Ramsay are “qualified” for US tax purposes. Dividends will be taxed at a rate of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

The Australian government withholds 5 percent to 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 five rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology, while eight rate it a “hold.” Three brokerages that cover Ramsay rate the stock a “sell.”

The average 12-month target price among the 12 analysts that provide a figure is AUD52.14, with a high of AUD59.73 and a low of AUD49.  Based on an Oct. 9, 2014, closing price of AUD49.68 on the ASX, the implied one-year total return, including the present annualized dividend rate of AUD0.85, is 6.7 percent.