2024-01-06
On January 3, 2024, Walgreens Boots Alliance Inc. [WBA] announced that its next quarterly dividend will be $0.25. That should amount to $1.00 per share for calendar year 2024, a generous yield of 4%. Unfortunately, that $1.00 per share will be a 48% drop from the dividends paid in 2023 and the end of a 48-year dividend increase streak.
Walgreens had been a household name for many years, but in 2014 it rose rather rapidly in popularity and reached an all-time high in the middle of 2015. It held its ground from 2016 through 2018 but there were signs of trouble beginning in 2019 and the stock price started to slide. It was barely able to increase the dividend in the years that followed. Then in the summer of 2023, the seriousness of its financial troubles made increasing the dividend problematic. WBA felt that holding the dividend at the same level seemed to be the right move. Times were tough, but it was business as usual, and the stock price dropped further still. Surely, there would be an increase in 2024 and then, come 2025, a crowning! The desire to be a Dividend King had not faded, but some matters absolutely had to be addressed and quickly.
Unfortunately, the financial problems only increased. The $0.48 dividend that persisted for six quarters, despite the clear strain on cash flow, was now hurting their future prospects. WBA was at a crossroads.
Certainly, many of the shareholders wanted the dividend increases to resume in 2024. But then what exactly would happen in 2025? Would they really want another unaffordable dividend increase knowing that it would throw future earnings into a tailspin, knowing the decision was one of gross negligence, placing the company’s actual survival in serious jeopardy?
There are, undoubtedly, just as many shareholders who believe in their hearts that one should not seek the crown if it puts the survival of the company at risk. In fact, they have always believed that capitalism and basic economic laws ensure that one cannot become a king through sheer force of will.
WBA has chosen to start all over again and it is doubtful that I, or anyone else for that matter, will ever see WBA become a king. But make no mistake, cutting the dividend and giving up the idea of holding the crown was the right thing to do for the company and its shareholders.