What Makes Sonic Healthcare Limited (ASX:SHL) A Great Dividend Stock?

Sonic Healthcare Limited (ASX:SHL) has pleased shareholders over the past 10 years, paying out an average dividend of 4.00% annually. The company currently pays out a dividend yield of 2.97% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Sonic Healthcare in more detail.

See our latest analysis for Sonic Healthcare

5 checks you should do on a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

ASX:SHL Historical Dividend Yield August 16th 18

How well does Sonic Healthcare fit our criteria?

The current trailing twelve-month payout ratio for the stock is 71.17%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SHL’s payout to remain around the same level at 71.03% of its earnings, which leads to a dividend yield of around 3.44%. In addition to this, EPS should increase to A$1.17.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of SHL it has increased its DPS from A$0.49 to A$0.78 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes SHL a true dividend rockstar.

Compared to its peers, Sonic Healthcare has a yield of 2.97%, which is on the low-side for Healthcare stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Sonic Healthcare is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three key factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for SHL’s future growth? Take a look at our free research report of analyst consensus for SHL’s outlook.

2. Valuation: What is SHL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SHL is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.