Down more than 18% in a month with a 7% yield, are Sonic Healthcare shares too cheap to ignore?

The Sonic Healthcare Ltd (ASX: SHL) share price has fallen by more than 18% since 19 August 2026, which is a hefty drop for an ASX healthcare share in a short time. When businesses fall that much, it’s worthwhile considering an investment.

Sonic Healthcare is a global pathology business with a presence across a number of countries, including Australia, Germany, the US, the UK, Switzerland, and New Zealand.

Let’s take a look at whether this is a good time to buy or not.

Defensive earnings

There’s a lot of uncertainty for the global economy at the moment, with rising interest rates, stronger inflation, AI uncertainties, and so on.

Healthcare is one of those industries, in my view, that have defensive earnings. We don’t choose when to get sick, so there’s fairly consistent demand year to year. Most people also place their health as a high priority compared to many other spending categories.

But higher interest rates are a headwind for most share prices, including defensive names. Still, I believe Sonic Healthcare’s financials can continue growing.

In FY26, revenue rose 13% to $10.9 billion, underlying operating profit (EBITDA) grew 11% to $1.9 billion, operating profit (EBITDA) rose 9% to $1.88 billion, underlying net profit rose 17% to $621 million, and statutory net profit grew 18% to $608 million.

Statutory earnings per share (EPS) grew 15% to $1.23.

Assuming the same exchange rate as FY26, EBITDA is predicted to grow to between $1.95 billion and $2.03 billion, excluding back office IT systems transformation costs of around A$30 million.

In the longer term, according to CommSec, analysts think earnings in FY28 and FY29 could grow.

With a mixture of organic growth (from tailwinds like an ageing population) and the occasional bolt-on acquisition, the future looks promising for profit growth.

The dividend yield

Sonic Healthcare has an impressive history of dividends. There have only been a couple of times over the last 35 years when the business didn’t increase its payout (it was maintained instead), and I expect that to continue in the years ahead.

The FY26 annual dividend was increased by 0.9% to $1.08. Future earnings growth is expected to support achieving of the target dividend payout ratio of between 70% to 80% of net profit.

The FY26 payout translates into a 7.2% dividend yield, including franking credits, at the time of writing. That’s a very attractive yield, in my view.

Is the Sonic Healthcare share price cheap?

At the time of writing, the Sonic Healthcare share price is trading on a price-earnings (P/E) ratio of less than 16.

I think this is a great time to invest in the business, as I don’t expect the outlook to remain as uncertain forever. Therefore, a temporary sell-off could be a long-term opportunity. Even if the P/E ratio doesn’t increase, future earnings growth (and large dividends) can help drive shareholder returns.

The post Down more than 18% in a month with a 7% yield, are Sonic Healthcare shares too cheap to ignore? appeared first on The Motley Fool Australia.

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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.