Walgreens Boots Alliance (WBA) has many of the characteristics of a high-quality business. The company has a well-known brand, a global operating presence, and an excellent history of raising its dividend over time.
In fact, Walgreens’ dividend history places the business among elite company. With 42 years of consecutive dividend increases, Walgreens is a member of the Dividend Aristocrats Index, a group of elite dividend stocks with 25+ years of consecutive dividend increases.
Despite Walgreens’ impressive dividend history, the potential entry of Amazon (AMZN) into the pharmaceutical distribution industry has led some investors to question the safety of the company’s current dividend payment.
To begin, let’s talk about Walgreens’ business model. Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures (including equity investments), Walgreens has a presence in more than 25 countries and employs more than 385,000 people. In its leading retail pharmacy business, Walgreens operates approximately 13,200 stores in 11 countries. The company also operates one of the largest global pharmaceutical wholesale and distribution networks, with more than 390 centers that deliver to upwards of 230,000 pharmacies, doctors, health centers, and hospitals each year. Walgreens operates in three financial segments:
- Retail Pharmacy USA,
- Retail Pharmacy International
- Pharmaceutical Wholesale.
Walgreens is a well-known dividend stock because of its compelling track record of dividend growth. With 42 years of consecutive dividend increases, Walgreens is a member of the Dividend Aristocrats Index, a group of elite dividend stocks with more than 25 years of consecutive dividend increases.
Looking ahead, Walgreens’ high dividend yield has led many investors to question the safety of its future dividend payments. For the remainder of this article, we will discuss the company’s current dividend safety from four perspectives:
- its dividend safety in the context of its current earnings
- its dividend safety in the context of its current free cash flow
- its dividend safety in the context of its recession performance
- its dividend safety in the context of its current debt load
The potential entry of Amazon into the pharmaceutical industry has led some investors to question the safety of Walgreens’ current dividend payment.
However, we concluded that Walgreens’ dividend is safe for the foreseeable future, and we believe there is a very low probability that the company cuts its dividend moving forward.