The pharmacy giant, Walgreens Boots Alliance, shocked investors by sharply cutting its quarterly dividend. How will this decision affect the company's future, and what does new CEO Tim Wentworth plan to do to restore growth?

Walgreens Boots Alliance $WBA+2.7%, a key player in the pharmacy and medical services world, saw a dramatic drop in the market after announcing a significant cut of more than 10% in its quarterly dividend. This decision, which comes after 91 years of stable dividends, triggered a 10% loss in the stock.

Walgreens'adjusted earnings for the first quarter of the fiscal year came in at 66 cents per share, beating analysts' expectations. However, along with that, a dividend cut was announced from 48 cents to 25 cents per share, a marked drop from previous quarters. This news came in the context of a longstanding practice of stable dividends, which Walgreens has maintained for an incredible 91 years.

Walgreens CEO, Tim Wentworth, emphasized that the dividend cut reflects the company's strategy to adapt to new challenges and gain financial flexibility. Wentworth also stated that the goal is to invest in growth and potentially reduce debt while maintaining a competitive dividend yield.

Experts welcome the decision and see it as prudent. The dividend cut is expected to save Walgreens roughly $800 million a year, which could be used to further investment and restructuring measures.

This unexpected decision has sparked a strong reaction in the markets, despite the stock's recent 30% rise.

Walgreens

WBA

$11.82 $0.31 +2.69%

Capital Structure

Market Cap

10.2B

Enterpr. Val.

43.2B

Valuation

P/E

-1.8

P/S

0.1

Open $11.62

Day range $11.37 - $11.83

52 week range $10.69 - $30.86

Walgreens is now focusing on debt repayment and considering a possible change in its contracting strategy. The move could boost the company's profitability and competitiveness in a competitive environment.

The company entered the new fiscal year with a new CEO, Tim Wentworth, facing challenges in the retail pharmacy business. Despite the current challenges, the company remains optimistic about adjusted earnings in fiscal year 2024.

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Source.