Stock Analysis

Walgreens Boots Alliance (NASDAQ:WBA) Is Paying Out A Larger Dividend Than Last Year

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Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has announced that it will be increasing its periodic dividend on the 9th of September to $0.48, which will be 0.5% higher than last year's comparable payment amount of $0.478. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Walgreens Boots Alliance

Walgreens Boots Alliance's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Walgreens Boots Alliance's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 26.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 46%, which is comfortable for the company to continue in the future.

NasdaqGS:WBA Historic Dividend July 17th 2022

Walgreens Boots Alliance Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was $0.90, compared to the most recent full-year payment of $1.91. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Walgreens Boots Alliance Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Walgreens Boots Alliance has seen EPS rising for the last five years, at 8.2% per annum. Walgreens Boots Alliance definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Walgreens Boots Alliance Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Walgreens Boots Alliance is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Walgreens Boots Alliance (1 is a bit concerning!) that you should be aware of before investing. Is Walgreens Boots Alliance not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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