The ASX dividend stock Sonic Healthcare Ltd (ASX: SHL) has fallen 40% from its peak in 2021. While the pathology business was benefiting from strong demand for COVID tests a few years ago, I think it's a strong investment today for a variety of reasons.
The business has a presence in a number of countries including Australia, the USA, Germany, the UK, Switzerland, Belgium and New Zealand.
One of the main reasons why I like this business as a potential dividend idea is because it operates in a defensive sector – people don't choose when to become sick based on what's going on with the economy.
Now I'll outline why I find it attractive as an ASX dividend stock.
The business has one of the most impressive dividend records on the ASX, in my view.
The ASX dividend stock has been listed for decades and it hasn't hit investors with a dividend cut in the last 30 years. In-fact, it raised the dividend in almost every year of the past three decades except when it maintained the payments for a couple of years during the early 2010s.
While past performance is not a guarantee of future performance with dividends, I think the track record shows the company's board of directors aim to provide investors with a pleasingly resilient level of dividends.
The business has grown its dividend each year over the past decade I think it's well placed to continue that track record. I'll explain why I'm confident on the future payments in a moment. Before I get to that, let's look at how large the passive income could be in the near-term.
Dividends are not guaranteed, but analysts are optimistic that larger dividends could be on the way.
According to the forecast on Commsec, the company is predicted to pay an annual dividend per share of $1.08 per share in FY25. That translates into a forward dividend yield of 3.8%, excluding any potential franking credits.
The dividend could grow to an annual dividend per share of $1.17 in FY26, which would translate into a dividend yield of 4.2%. That would be a year-over-year growth of 8.3% if the projection is right.
Dividends are paid from generated profit, so profit growth is key for a larger payout and a rising share price.
In the FY25 half-year result, Sonic Healthcare reported that its revenue rose 8% to $4.67 billion and 15% earnings per share (EPS) growth. It benefited from organic revenue growth of 6.1% as well as the revenue boost from acquisitions.
The company's net profit is also benefiting from cost control programs, particularly labour.
With its main markets experiencing ageing and growing populations, I believe the ASX dividend stock's revenue and net profit can continue to rise in the coming years, funding larger dividends.
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