The advice of Sonic Healthcare Limited (ASX:SHL) announced that it will pay its dividend of AU$0.60 on September 21, an up payment from last year’s comparable dividend. This brings the annual payout to 2.8% of the current share price, which is within the industry average.

Check out our latest analysis for Sonic Healthcare

Sonic Healthcare payment provides strong revenue coverage

Unless the payouts are sustainable, the dividend yield doesn’t mean much. However, the profits of Sonic Healthcare easily cover the dividend. This means most of his income is kept to grow the business.

Looking ahead, earnings per share are expected to fall 47.0% over the next year. If the dividend holds up on recent trends, we estimate the payout ratio could be 64%, which we consider quite comfortable, with most of the company’s earnings remaining to grow the business going forward. .

Sonic Healthcare has a strong track record

The company has a steady history of paying dividends with very little fluctuation. The annual payment over the last 10 years was 0.59 Australian dollars in 2012, and the payment for the most recent financial year was 1.00 Australian dollars. This implies that the company has increased its distributions at an annual rate of approximately 5.4% over this period. Dividends have been growing at a reasonable pace over this period, and without any major reduction in payout over time, we think this is an attractive combination as it gives yields a good boost for shareholders.

The dividend should increase

Investors might be attracted to the stock because of the quality of its payment history. It is encouraging to see that Sonic Healthcare has increased its earnings per share by 25% per year over the past five years. Earnings have grown rapidly, and with a low payout ratio, we believe the company could prove to be an excellent dividend-paying stock.

Sonic Healthcare looks like a great dividend stock

Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. Profits easily cover company distributions, and the company generates plenty of cash. Note that earnings are expected to fall over the next 12 months, which won’t be a problem if it doesn’t become a trend, but could cause some turbulence over the next year. Overall, this checks a lot of the boxes we look for when choosing an income stock.

Companies with a stable dividend policy are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. However, there are other things for investors to consider when analyzing stock performance. For example, we identified 1 warning sign for Sonic Healthcare which you should be aware of before investing. Isn’t Sonic Healthcare quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.