Wednesday, July 8, 2009

Walgreen nearly doubles dividend since 2006

the moneygardener darling, US drugstore chain Walgreen Co. (WAG) has increased it's quarterly dividend by 22%. This is the 35th consecutive year that Walgreen has raised it's dividend. Walgreen has been growing it's dividend at a torrid pace over the past few years. In fact, since 2006 WAG has roughly doubled it's dividend.

The stock is now yielding only 1.8%, however a purchase during the depths of March, 2009 would have yielded 2.6% on cost. It is interesting that the company is choosing to increase the dividend at such a high rate given the current slowdown in earnings growth. Walgreen's last quarterly earning report was actually down 9% from 2008. The pay out ratio is rising and the company's traditional objective of rewarding shareholders with growth, may be shifting to include paying out cash in the form of dividends.

The company is currently largely focusing on cutting costs and driving productivity. 2009 earnings look like they will come in lower than 2008 after much expense due to cost-cutting restructuring. I remain very bullish on the company long term due to their strong brand, their market position, and US demographic trends. WAG currently makes up about 6% of my portfolio.

Last year in July, Walgreen increased their dividend by about 18%.

No comments: