Walgreens Boots Alliance's (NASDAQ:WBA) Dividend Will Be $0.48

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has announced that it will pay a dividend of $0.48 per share on the 12th of December. This makes the dividend yield 5.2%, which will augment investor returns quite nicely.

Our analysis indicates that WBA is potentially undervalued!

Walgreens Boots Alliance's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Walgreens Boots Alliance was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

EPS is set to fall by 14.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 dividend has gone from $0.90 total annually to $1.92. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Walgreens Boots Alliance's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Walgreens Boots Alliance has grown earnings per share at 5.7% per year over the past five years. Walgreens Boots Alliance definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Walgreens Boots Alliance's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Walgreens Boots Alliance's payments, as there could be some issues with sustaining them into the future. While Walgreens Boots Alliance is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 2 warning signs for Walgreens Boots Alliance (of which 1 can't be ignored!) you should know about. 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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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.