Stock Analysis

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

  •  Updated
NasdaqGS:WBA
Source: Shutterstock

The board of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has announced that it will be increasing its dividend on the 10th of September to US$0.48. This will take the annual payment to 4.0% 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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Walgreens Boots Alliance's dividend made up quite a large proportion of earnings but only 33% of free cash flows. 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.

Looking forward, earnings per share is forecast to rise by 52.2% over the next year. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:WBA Historic Dividend August 3rd 2021

Walgreens Boots Alliance Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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 means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Walgreens Boots Alliance May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Walgreens Boots Alliance's earnings per share has fallen at approximately 2.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Walgreens Boots Alliance's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Walgreens Boots Alliance that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

When trading Walgreens Boots Alliance or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Walgreens Boots Alliance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis