The ASX dividend share Sonic Healthcare Ltd (ASX: SHL) has delivered excellent returns for long-term investors.
Since January 1999, the Sonic Healthcare share price has risen by close to 900%. However, it's also true to say that the stock has dropped more than 40% since December 2021. I believe this sell-off is a good time to invest in the ASX healthcare share.
Past performance is not necessarily a reliable indicator of future performance – I'm not expecting the global pathology company's share price to rise by another 900% in the next 25 years.
But, a combination of good organic growth, global acquisitions and a shareholder focus could be appealing for the foreseeable future.
Passive income credentials
The company's board has a progressive dividend policy. In other words, the directors want to increase the dividend each year for investors if the profit, balance sheet and business conditions enable it to.
There are not many businesses on the ASX that have grown their dividends every year in a row for at least a decade. The ASX dividend legend has increased its payout annually since 2013.
But the company's impressive dividend credentials stretch back further than its current streak. The business increased its annual dividend per share every year between 1994 and 2010. It paid an annual dividend per share of 59 cents between 2010 and 2012 and then started increasing the dividend again in 2013 when the payout was hiked to 62 cents per share.
In other words, it has grown or maintained its dividend every year since 1994, and its payout was maintained for just two of those years.
In FY24, the company grew its annual payout by 1.9% to $1.06 per share, which translates into a current dividend yield of 3.9%, excluding franking credits.
Good time to invest in the ASX dividend legend
Optimism about the company has suffered as its profitability took a hit due to elevated costs due to inflation and the winding down of COVID testing revenue.
The company noted that its operating profit (EBITDA) margin improved in the second half of FY24 compared to the first half, suggesting a "return to margin expansion".
Sonic Healthcare is expecting its EBITDA to rise approximately 10% in FY25, supported by ongoing revenue growth, cost control and operating leverage.
In FY24, the ASX dividend share achieved base business organic revenue growth of 6%, which I think is a solid increase and doesn't take into account the bonus of the acquisitions in places like Switzerland and Germany. Sonic reported total base business revenue growth of 16% in FY24.
Sonic Healthcare is expecting future margins and overall profit to increase due to synergies from acquisitions, new contracts, lower inflation, technology investments, and more.
The company noted at the time of its FY24 results that further acquisition and contract opportunities were under consideration.
At the current Sonic Healthcare share price, I think it's a solid long-term buy, particularly if it can implement more technology (such as AI) throughout its operations.
