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After 43 Years, Walgreens Dividend Growth Is Just Getting Started

Aug. 05, 2018 12:59 PM ETWBA, CVS12 Comments
Michael Henage profile picture
Michael Henage


  • Two competitive threats seem to be overblown.
  • Walgreens has been increasing its dividend, buying back shares, and paying down debt; yet the payout ratio still dropped.
  • Walgreens' investors should expect dividend growth like 2013 and 2014.

Unless you’ve been hiding under a rock, you probably know about Walgreens Boots Alliance (NASDAQ: WBA) and its decades of dividend increases. If the perfect business has constant demand and increasing prices, you couldn’t ask for better than the retail pharmacy business. Walgreens showed its confidence in the future by announcing yet another dividend increase, and a $10 billion share repurchase program. Though there are many challenges facing the company, investors have several reasons to expect strong growth in Walgreens’ dividend over the next several years.

The competition

When Amazon announced it was acquiring PillPack, several companies including Walgreens declined as investors reacted in fear. CVS Health Corporation (NYSE: CVS) is attempting to buy Aetna, to create a top-down solution that would in theory give it a competitive advantage. Each of these events poses a risk to Walgreens, but I believe both are overblown.

Amazon has been a disruptive force in almost every market it attempted to move into, so the PillPack acquisition is making retail pharmacy investors nervous. Investors in Walgreens need to remember two things: 1. Amazon doesn’t always win with new business. 2. PillPack has some built in disadvantages compared to a physical pharmacy.

Not everything Amazon touches turns into gold. The PillPack acquisition reminds me of the Fire Phone. Prognosticators and analysts were quick to assume the Fire Phone would take market share from other companies based on the strength of Amazon’s brand. However, the response to the device was so bad that the company wrote off a loss of $170 million and stopped selling the device completely. The reality is, just because Amazon can compete in an industry doesn’t mean it should.

Even if PillPack doesn’t go the way of the Fire Phone, there are two massive hurdles in trying to take market share in the

This article was written by

Michael Henage profile picture
I've been investing for over 20 years and have written over 1,300 articles about investing and stock analysis. I'm a tech nerd and a completely obsessed NFL fan.

Analyst’s Disclosure: I am/we are long CVS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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