The ASX dividend stock Sonic Healthcare Ltd (ASX: SHL) has dropped 43% since the COVID-19 peak of December 2021. This business provides pathology services for patients in a number of countries, including Australia, the UK, Germany, Switzerland, New Zealand and the USA.
It's understandable why the company has fallen so far, since investors typically value an ASX share based on how much profit it's making. The company played a big part in all of the COVID-19 testing that helped identify who had the illness. However, COVID-19 testing revenue has now ended as a meaningful contributor to Sonic. Accordingly, it's just organic growth that contributes to the business now.
For two reasons, I think this ASX dividend stock could be a good one to focus on.
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Solid dividend
Over the past 30 years, the business has grown its dividend most years. It has increased its payout every year since 2013. That's one of the stronger dividend records on the ASX, thanks to its exposure to healthcare earnings.
The last two dividends declared came to a total dividend per share of $1.07. This is a dividend yield of 4%, with no franking credits. If it did start attaching franking credits to the dividend, this would be a larger dividend.
I think the dividend could continue climbing in the coming years because of its resilient earnings, despite global share market headwinds.
Defensive earnings
Healthcare is a very defensive sector in my opinion – people don't choose when to get sick based on what's going on with the economy, the stock market or GDP.
Sonic Healthcare isn't a high-risk biotech stock, it provides important pathology services that is used by various patients across the world.
The ASX dividend stock has made a number of acquisitions, particularly in Europe, to boost its scale. Not only does this boost the revenue, but the company can also find cost and technology synergies between the businesses.
For example, it's investing in AI to help improve patient outcomes and improve efficiencies for the business.
According to the forecast on Commsec, the Sonic Healthcare share price is valued at 25x FY25's estimated earnings. I think that's an appealing valuation.
