You’ve started your portfolio with some shares in a few famous blue-chip companies. You’ll feel comfortable with your choices because you have a good understanding of what those companies do and you’re ready to look further afield. There are more than 2000 companies on the ASX, so getting your head around where to look can be a challenge. I’d like to talk about Sonic Healthcare Limited (ASX: SHL) as a genuine consideration for anyone just starting their investment journey.
What does Sonic Healthcare do?
Sonic Healthcare is a major global healthcare provider which operates in Australia, the United States (US), the United Kingdom (UK) and parts of Europe. The business is focused on delivering diagnostic pathology and radiology services to the medical community. Breaking it down in the simplest terms to something we can all relate to, think blood testing and X-rays amid a range of vastly more complex services.
A closer look at Sonic’s financial performance
Historically, Sonic Healthcare has given investors two reasons to be happy. Firstly, consistent growth over a long period and regular dividends. To highlight this, if you’d purchased Sonic Healthcare shares 10 years ago at $11.70, you could have sold them today at $27.82. That’s a very respectable 108% return on investment over the previous decade. The dividend has been consistently growing, with the last full-year dividend paying out at a partially franked 81 cents a share.
In Sonic Healthcare’s most recent half-yearly report there were enough reasons to believe the current momentum will continue. The company is doing well in the US with revenue up 8% and net profit up 7% overall. Sonic Healthcare has purchased Aurora Diagnostics to further bolster growth opportunities in the US. On the flipside, the company announced in June that it was selling its 85% stake in GLP Systems, a German lab technology company, to reduce debt and support future acquisitions.
The broader context
Now that we’ve discussed the fundamentals, I like to dig a little deeper into how companies like Sonic Healthcare connect with the outside world and operate in communities. I was pleased to see a range of energy and waste reduction policies embedded across its global sites and what appears to be its community engagement flagship, the Catalyst Program. This program aims to benefit some of world’s most disadvantaged communities by “establishing sustainable, modern pathology and imaging services that lead to local self-reliance.” In partnership with local organisations, Sonic Healthcare provides a range of services on the ground including provision of equipment, education and training, logistics and cash support.
I understand not all investors take the deep dive into what I’ll loosely term “community engagement” when making an investment decision. I do know that many people do note these things, as they form a small part of a bigger picture. In the end, it’s your call and your decisions should be made around your broader investment strategy, which may indeed include community engagement and sustainability.
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Motley Fool contributor JWoodward has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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