The ASX dividend stock Sonic Healthcare Ltd (ASX: SHL) has dropped 36% since April 2023, as the chart below shows. I think it’s fair to say that the last few years have been rough for shareholders following the COVID-19 testing boom.
Sonic Healthcare is a global pathology business with a presence in a number of Western countries including the USA, Australia, Germany, Switzerland, the UK, Belgium and New Zealand.
I think it’s useful for the business to have geographic exposure as this allows it to expand in a number of countries and reduces the risk of being too exposed to one country.
Its dividend record alone makes the ASX dividend stock an exciting investment.
Incredible payout record
When I invest in dividend-paying businesses, I’m looking for companies that provide stable and hopefully growing payments.
Sonic Healthcare increased its payout per share every year between 1994 and 2010, maintained the payout in 2011 and 2012 and has grown it every year since. It has one of the most consistent and impressive dividend records on the ASX over the last three decades.
Dividend growth is not guaranteed, but it’s clear that Sonic Healthcare is focused on paying investors as good a dividend as it can while still investing for growth.
The business itself has committed to having an ongoing “progressive dividend policy”, which bodes well for future payments.
The forecast on CMC Markets suggests that the business could pay an annual dividend per share of $1.10 in FY26. Excluding any potential franking credits, that projection translates into a dividend yield of 4.7%.
It’s expected to grow the annual payout to $1.12 per share in FY27 and $1.155 in FY28. If it does that, the business will be able to provide investors with steady passive income.
Is this a good time to invest in the ASX dividend stock?
It’s not generating the same level of profit that it did during the COVID-19 testing surge, but its earnings are expected to rise thanks to organic growth and acquisitions. It has made a number of European acquisitions to help boost its scale and earnings base.
The projection on CMC Markets suggests the business could grow earnings in FY26 and beyond. In FY26, earnings per share (EPS) could increase to $1.25. EPS could then improve to $1.36 in FY27 and $1.46 in FY28. It’s currently valued at under 19x FY26’s estimated earnings.
Its EPS is being helped by ageing and growing populations, which are strong tailwinds for the business. While its best growth rate may be behind it, I think it’s still a solid ASX dividend stock for the long-term.
The post 1 ASX dividend stock down 36% I’d buy right now appeared first on The Motley Fool Australia.
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More reading
- 3 ASX shares that I rate as buys for both growth and dividends
- 3 strong ASX dividend shares to buy for your SMSF
- 3 quality ASX healthcare shares worth buying now
- Buy these ASX dividend stocks for 5% to 10% yields: Experts
- 5 ASX dividend shares to buy in January
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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