The board of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has announced that the dividend on 9th of September will be increased to $0.48, which will be 0.5% higher than last year's payment of $0.478 which covered the same period. This makes the dividend yield 4.9%, which is above the industry average.
Walgreens Boots Alliance's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Walgreens Boots Alliance's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 30.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.
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. Since 2012, the annual payment back then was $0.90, compared to the most recent full-year payment of $1.91. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% 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.
We Could See Walgreens Boots Alliance's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Walgreens Boots Alliance has grown earnings per share at 8.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Walgreens Boots Alliance's prospects of growing its dividend payments in the future.
We Really Like Walgreens Boots Alliance's Dividend
Overall, a dividend increase is always good, and we think that Walgreens Boots Alliance is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Walgreens Boots Alliance (1 is significant!) 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.
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