Walgreens Suspends Dividend After 90 Years, Signals Cash Flow Concerns
Dividend Cut
Walgreens Boots Alliance Inc. (WBA) announced the suspension of its dividend on Thursday, ending a streak of quarterly payouts that spanned over 90 years. The decision aims to strengthen the company's balance sheet and enhance free cash flow.
Financial Challenges
Walgreens has been grappling with unfavorable prescription reimbursement rates, rising operating expenses, theft, and inflation-driven consumer spending shifts. The company is proactively closing 1,200 of its U.S. stores as part of a turnaround plan.
Suspension Rationale
The company attributed the dividend suspension to anticipated cash requirements over the next few years, including litigation expenses and debt refinancing. In September, Walgreens settled a lawsuit over false payment claims for $106 million.
Dividend History
Walgreens has consistently paid quarterly dividends since 1933, with a total payout of $1.7 billion in fiscal 2023. The dividend was cut by 50% in 2022, from 48 cents to 25 cents per share.
Analyst Reactions
Analysts have mixed views on the suspension. Some see it as a prudent move, while others believe it highlights cash flow issues. The suspension sends a signal of financial distress, according to senior index analyst Howard Silverblatt.
Market Impact
Premarket trading on Friday saw Walgreens shares drop over 11% to $10.16, reflecting market concern about the company's financial health.