Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • AUD/USD

    0.6497
    -0.0038 (-0.59%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    82.64
    +1.29 (+1.59%)
     
  • GOLD

    2,229.00
    +16.30 (+0.74%)
     
  • Bitcoin AUD

    108,531.32
    +690.70 (+0.64%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     

Walgreens Boots Alliance (NASDAQ:WBA) Is Paying Out A Dividend Of $0.48

The board of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has announced that it will pay a dividend of $0.48 per share on the 10th of March. Based on this payment, the dividend yield on the company's stock will be 5.2%, which is an attractive boost to shareholder returns.

View our latest analysis for Walgreens Boots Alliance

Walgreens Boots Alliance's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

ADVERTISEMENT

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 38%, which makes us pretty comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Walgreens Boots Alliance Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.90 in 2013 to the most recent total annual payment of $1.92. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Walgreens Boots Alliance's EPS has declined at around 11% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for Walgreens Boots Alliance you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here