Walgreens (NASDAQ:WBA) is one of the top-trending tickers on websites and social media today after the company announced that it would cut its dividend nearly in half. The firm also released better-than-expected results for its fiscal first quarter. However, WBA stock still fell by about 5% in early trading this morning.
Walgreens’ Dividend Cut and Its Implications for Investors
WBA slashed “its quarterly dividend by 48%, to 25 cents a share from 48 cents a share.” The move will reduce the stock’s dividend yield to 3.9% from 7.5%.
Walgreens has had to pay out very large amounts of money to settle litigation related to its role in the opioid crisis, and these payments have caused its balance sheet to become quite ominous.
Specifically, at the end of the last quarter for which it reported results, it had a whopping $34 billion of dent and cash reserves of just $739 million. Moreover, its low current ratio of 0.6 indicates that it could have trouble paying its bills in the near-to-medium term.
The company’s decision to reduce its payout by a large amount is another sign that the firm may be in the midst of a serious cash crunch.
Walgreens’ Q1 Results and the Price Action of WBA Stock
WBA generated earnings per share of 66 cents, excluding certain items, versus analysts’ average estimate of 61 cents, while its top line came in at $36.7 billion, well above the mean outlook of $34.86 billion.
However, on the bottom line, it reported a loss of $67 million.
WBA has climbed 15% in the last three months, but it has declined over 27% in the last year.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
