Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 15th of November to receive the dividend, which will be paid on the 12th of December.
Walgreens Boots Alliance's next dividend payment will be US$0.5 per share. Last year, in total, the company distributed US$1.8 to shareholders. Last year's total dividend payments show that Walgreens Boots Alliance has a trailing yield of 3.1% on the current share price of $59.24. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Walgreens Boots Alliance paying out a modest 41% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Walgreens Boots Alliance's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Walgreens Boots Alliance has increased its dividend at approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Walgreens Boots Alliance for the upcoming dividend? We love that Walgreens Boots Alliance is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Walgreens Boots Alliance looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of Walgreens Boots Alliance? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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