Over the past 10 years Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has been paying dividends to shareholders. The company currently pays out a dividend yield of 2.8% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Walgreens Boots Alliance in more detail.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Walgreens Boots Alliance pass our checks?
The company currently pays out 31% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect WBA’s payout to fall to 25% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.0%. However, EPS should increase to $5.65, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. WBA has increased its DPS from $0.45 to $1.76 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes WBA a true dividend rockstar.
In terms of its peers, Walgreens Boots Alliance produces a yield of 2.8%, which is high for Consumer Retailing stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Walgreens Boots Alliance as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WBA’s future growth? Take a look at our free research report of analyst consensus for WBA’s outlook.
- Valuation: What is WBA worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WBA is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.