U.S.-based pharmacy chain Walgreens Boots Alliance (WBA) suspended its long-standing dividend to preserve cash and prioritize its turnaround strategy. The company cited cash needs for the upcoming years, including litigation costs and debt refinancing, as key reasons for suspending the dividend. Investors responded negatively, with shares falling more than 8% in after-hours trading.
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Analyst Weighs In on Walgreens’ Dividend Suspension
Leerink Partners analyst Michael Cherny called the dividend suspension “prudent and somewhat overdue.” Earlier this week, Cherny reiterated his Hold rating on WBA stock.
He further stated that this decision is a necessary step to help Walgreens reset and revitalize its business. However, in the short term, it may trigger forced technical selling since the company will no longer provide income for dividend-focused investors.
Meanwhile, the company said with this shift in capital allocation, it aims to strengthen its balance sheet, reduce debt, and boost free cash flow to support its retail pharmacy-led turnaround.
Walgreens Struggles Persist Amid Ongoing Opioid Legal Issues
The dividend decision comes shortly after the U.S. Department of Justice (DOJ) filed a lawsuit claiming the pharmacy chain knowingly filled millions of prescriptions without a valid medical purpose. The DOJ accused Walgreens of filling illegal prescriptions in December 2024, helping fuel the opioid crisis.
Before this, Walgreens resolved a lawsuit in January 2023 over its involvement in the opioid crisis in West Virginia, agreeing to pay around $83 million to the state over eight years, starting that year.
Earlier this month, Walgreens posted a net loss of $265 million for Q1 FY25, up from a $67 million loss in the same quarter last year. However, adjusted earnings per share came in at $0.51, surpassing Wall Street’s expectation of $0.38. Additionally, it reported revenue of $39.5 billion, marking a 7.5% year-over-year increase driven by growth across all business segments. Despite the loss, the company believes that its first-quarter results reflect its disciplined execution of its 2025 priorities.
Is Walgreens a Good Stock to Buy Right Now?
According to TipRanks consensus, WBA stock has a Hold rating based on seven Hold, one Buy, and two Sell recommendations. The average Walgreens share price target is currently $11.75, which is 2.53% below the current price level.
Over the last 12 months, the company’s stock has declined by nearly 50%.
