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

The board of Walgreens Boots Alliance, Inc. ( NASDAQ:WBA ) has announced that it will pay a dividend on the 12th of June, with investors receiving $0.48 per share. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Walgreens Boots Alliance

Walgreens Boots Alliance's Dividend Is Not Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Walgreens Boots Alliance is unprofitable despite paying a dividend, and it is paying out 169% of its free cash flow. These payout levels would generally be quite difficult to keep up.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 34%, which we would be comfortable to see continuing.

Walgreens Boots Alliance Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.10 in 2013 to the most recent total annual payment of $1.92. This means that it has been growing its distributions at 5.7% per annum 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.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Walgreens Boots Alliance's earnings per share has shrunk at 20% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Walgreens Boots Alliance's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Walgreens Boots Alliance 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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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.