Stock Analysis

Walgreens Boots Alliance (NASDAQ:WBA) Will Pay A Larger Dividend Than Last Year At US$0.48

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NasdaqGS:WBA
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Walgreens Boots Alliance, Inc. (NASDAQ:WBA) will increase its dividend on the 10th of September to US$0.48. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.

View our latest analysis for Walgreens Boots Alliance

Walgreens Boots Alliance's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 72% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 52.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

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NasdaqGS:WBA Historic Dividend July 19th 2021

Walgreens Boots Alliance Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.70 in 2011, and the most recent fiscal year payment was US$1.91. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Walgreens Boots Alliance has seen earnings per share falling at 2.3% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Walgreens Boots Alliance's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Walgreens Boots Alliance that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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What are the risks and opportunities for Walgreens Boots Alliance?

Walgreens Boots Alliance, Inc. operates as an integrated healthcare, pharmacy, and retailer in the United States, the United Kingdom, Germany, and internationally.

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Rewards

  • Trading at 55.6% below our estimate of its fair value

  • Earnings are forecast to grow 50.22% per year

Risks

  • Significant insider selling over the past 3 months

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Walgreens Boots Alliance

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