As the global population ages and the costs of healthcare continue to rise, the adoption of health insurance is also accelerating across the entire world. This is precisely why market research firm Global Market Insights projects that the global health insurance market will compound at 4.6% annually, reaching $3.9 trillion by 2027.

Health insurer Humana (HUM -1.60%) could be one of the biggest beneficiaries from the encouraging industry outlook. Here's why dividend growth investors would be wise to consider adding the stock to their portfolios.

Humana delivered blistering revenue and earnings growth

Since its founding in 1961, the Louisville, Kentucky-based Humana has grown into a $67 billion (by market capitalization) managed care business. For context, this makes it the fifth-biggest managed care company on the planet.

In early November, Humana shared its financial results for the third quarter ended Sept. 30. The company recorded $22.8 billion in revenue during the quarter, which was 10.2% higher over the year-ago period. What was behind the large-cap health insurer's double-digit top-line growth in the quarter?

Humana's combined medical, specialty, and Medicare Advantage membership inched 0.3% higher year over year to 26.9 million for the third quarter. This was due to the steadily growing demand for health insurance that I noted at the outset. Coupled with premium hikes to plan members, this led to the company's strong revenue growth during the quarter.

The managed care company's non-GAAP (adjusted) diluted earnings per share (EPS) soared 42.4% higher over the year-ago period in the third quarter. This was the result of two factors. First, Humana's non-GAAP net margin surged 110 basis points higher year over year to 5% for the quarter. Second, the company's diluted outstanding share count declined by 1.5% over the year-ago period. This explains how Humana's adjusted diluted EPS growth far exceeded its revenue growth during the quarter.

The company's membership base should grow both organically and through bolt-on acquisitions in the years ahead. That's why analysts are anticipating Humana will deliver 14.7% annual adjusted diluted EPS growth through the next five years.

A doctor talks with a patient.

Image source: Getty Images.

Don't be fooled by the modest dividend

Humana's 0.6% dividend yield may seem paltry compared to the S&P 500 index's 1.6% yield. However, the company could be a pleasant surprise for investors with the patience to let the dividends compound over the long run.

This is because Humana's dividend payout ratio will be just a touch over 12% in 2022, which suggests the dividend could grow moderately more than earnings in the years ahead. The payout is so low that it allows Humana to retain more than enough capital for its future growth, debt reduction, and share repurchases. This is why I would be shocked if Humana didn't deliver mid- to upper-teens annual dividend growth for at least the medium term.

A world-class business at a fair valuation

Aside from its excellent dividend growth prospects, Humana has continued its winning ways in 2022. The stock is up nearly 17% year to date, while the healthcare plans industry as a whole is just shy of 9% higher thus far. And surprisingly, Humana still looks like it is a buy for investors seeking a future Dividend Aristocrat for their portfolios.

The stock's forward P/E ratio of 19.3 represents a premium to the healthcare plans industry's average multiple of 17. But Humana's 14.7% annual earnings growth projection is meaningfully above the industry average of 12.7%.