Why this ASX dividend share is a retiree’s dream

ASX dividend share Sonic Healthcare Ltd (ASX: SHL) could be a dream holding for retirees due to its defensive earnings and impressive dividend profile.

Sonic Healthcare is a large global pathology business with operations across Germany, Australia, the USA, Switzerland, the UK, Belgium, Poland and New Zealand.

There are not many ASX shares that are as globally successful as Sonic Healthcare, and there’s a lot to like about the business.

Excellent dividend credentials

The Sonic Healthcare board of directors has a progressive dividend policy, and the payout has increased every year since 2013. Indeed, the annual dividend has increased almost every year since the mid-1990s.

Very few businesses on the ASX have a long-term dividend record like that. Only Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and APA Group (ASX: APA) have a similar sort of payout record.

In the FY26 half-year result, the ASX dividend share decided to increase its interim dividend by 2.3% to 45 cents per share.

The last two dividends declared came to $1.08 per share. Excluding franking credits, that equals a dividend yield of 5.4%. If it repeats that level of dividend over the next 12 months, it’d be a grossed-up dividend yield of 7%. I think any retiree would be happy with that level of passive income.

Earnings growth

Sonic Healthcare is not a business that’s stuck with no growth – it’s actively grown through both organic growth and acquisitions. The growing and ageing populations of its core markets give the business a promising tailwind of demand.

In the FY26 half-year result, the company reported revenue grew by 17% to $5.45 billion, with organic growth of 5%.

For me, earnings growth is the most important thing to drive the share price (and dividend) higher.

The ASX dividend share’s HY26 operating profit (EBITDA) rose 10% to $907 million. Meanwhile, net profit increased 11% to $262 million and operating cash flow grew 10% to $682 million.

Given the company’s focus on improving its operating leverage, acquisition synergy realisation, and ongoing cost control across the business, I think its earnings outlook is very positive.

According to the projection on Commsec, the business is forecast to generate earnings per share (EPS) of $1.18 in FY26. That means it’s valued at 17x FY26’s estimated earnings.

The company’s EPS is expected to increase to $1.36 in FY27 and then $1.57 in FY28, suggesting there’s a good chance of capital growth and dividend growth in the years ahead.

The post Why this ASX dividend share is a retiree’s dream appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group and Washington H. Soul Pattinson and Company Limited. 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.