Walgreens Boots Alliance, Inc. (NASDAQ:WBA) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Walgreens Boots Alliance, Inc. (NASDAQ:WBA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Walgreens Boots Alliance investors that purchase the stock on or after the 18th of August will not receive the dividend, which will be paid on the 9th of September.

The company's next dividend payment will be US$0.48 per share, and in the last 12 months, the company paid a total of US$1.91 per share. Looking at the last 12 months of distributions, Walgreens Boots Alliance has a trailing yield of approximately 4.7% on its current stock price of $40.59. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Walgreens Boots Alliance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Walgreens Boots Alliance paying out a modest 32% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 48% of its free cash flow in the past year.

It's positive to see that Walgreens Boots Alliance's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Walgreens Boots Alliance earnings per share are up 8.9% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Walgreens Boots Alliance has increased its dividend at approximately 7.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Walgreens Boots Alliance an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Walgreens Boots Alliance is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Walgreens Boots Alliance is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Walgreens Boots Alliance, and we would prioritise taking a closer look at it.

In light of that, while Walgreens Boots Alliance has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Walgreens Boots Alliance (1 is potentially serious) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.