A Huge New Dividend! A European Business! Walgreens Finds It Just Can’t Buy Love
Drugstore chain Walgreens (WAG) opened its wallet wide Tuesday morning, announcing its biggest-ever investment and its biggest-ever quarterly dividend hike. But investors scorned those advances and sent Walgreens shares diving in a rising market. Walgreens shareholders have been rather unhappy lately, and apparently it’s going to take a different kind of gift to undo the damage.
Among Walgreens’ offerings this morning was a $6.7 billion agreement to acquire a 45% stake in Alliance Boots, a company that owns Europe’s equivalent of Walgreens. It’s the blue Boots sign one seeks in London and Paris when looking for a prescription or emergency diapers. Separately, Walgreens also offered up a 22% quarterly dividend hike. Based on the share price before Tuesday morning’s selling, that comes to a quite nice 3.7% yield. Of course if this selling continues, it’ll get even better.
But quarterly earnings also released Tuesday morning killed any chance that Walgreens and investors will kiss and make up any time soon. While third quarter earnings were in line with forecasts, they came with a 6.6% drop in comparable store sales and a 9.9% drop in prescription sales. This unlovely result is due to a fight Walgreens lost with prescription benefits company Express Scripts Holdings (ESRX) last year. Express Scripts essentially took its millions of customers over to competitor CVS Caremark (CVS). Walgreens shareholders are still fuming about that.
Filed under: Company News