When there is some anxiety and uncertainty in the markets, investors begin looking at defensive stocks that may not be as volatile and could still offer good dividend income. Healthcare stocks are regularly popular for this.
One company, Sonic Healthcare Limited (ASX: SHL), may not be a household name, but probably many investors or family members have used its services. It provides medical imaging and diagnostic testing services like x-rays and MRIs that many people have to get when visiting doctors. There's a steady stream of business that is directly connected to healthcare provision. About half of its business comes from overseas in large markets like the US and Germany.
The stock is up about 19% in the past twelve months, easily beating the 3.8% gain of the S&P ASX All Ordinaries Index (ASX: ^AORD) over the same period.
It hit a high of $55.33 in late April and has pulled back to $53.80 now. Is there more for this stock? Here are three reasons the company should remain in your portfolio.
1) Dividend income
The stock has a decent 3.8% dividend yield that could help if the market continues to go sideways. Dividend payouts have been steady and trending up over the past five years. Earnings per share over the next several years are forecast to rise, so dividends could follow suit.
2) Business growth
In the first half, it saw a healthy 7% rise in revenue for Australian pathology. Its US business beat that with a 12% revenue rise. The company expects substantial profit margin and earnings growth will continue into FY 2015 in the US. Europe as a whole is showing gains as well. The company is on track for its full year guidance.
3) Improving technology and cost cutting
A new lab in Perth was completed to improve growth and two labs in Sydney and Brisbane will be getting world-leading Total Lab Automation systems to keep their technological edge over competitors. Also, the US business has begun a cost-cutting initiative to further drive margins.
