CVS Caremark Corporation (CVS), Walgreen Company (WAG): Investing in Your Corner Drug Store

Who is good, who is bad

Walgreen Company (NYSE:WAG) is far and away the best of the three companies for investors, not only because of a great stock history, but also thanks to its strong current numbers. Last quarter, dividends paid out 27.5 cents per share, making it 322 straight quarters of payouts (that’s over 80 years!). It also can boast 37 straight years of increasing annual dividends, with this year seeing a 24% increase in the compound annual growth rate. With a P/E of 21.79, it isn’t exactly affordable, but with a 12.19% ROE and an E/P ratio of 4.58%, it’s probably worth a little splurge, especially with the consistency of its dividend payouts and sales increases.

CVS Caremark Corporation (NYSE:CVS) is a more affordable option for those looking for a solid player in the industry with a P/E of 18.10 and a ROE of 10.65%. It’s a solid option, and it is a growing company with the strong growth in operating profits as well as solid franchise expansion. It also has a higher E/P ratio of 5.54%, giving it better yields than Walgreen. Dividend payouts though are more unpredictable though, so that is something to consider when making a stock purchase.

Rite Aid Corporation (NYSE:RAD) has been the weakest of the three, and it is starting to recognize and correct problems that are making it the third-place contender. On June 7, the company announced the issuance of a $500 million loan to bring down increasing interest expenses, as well as narrowing its EPS range. It beat Street estimates last quarter, so it isn’t a bad company, though with decreasing profits, storefronts, and quarterly sales, it can do a lot better. It is the most expensive stock of the three, despite a share price of around $3/share. Its P/E is the highest at 24.98, while its E/P is the lowest at 3.96%, as well as a negative ROE of -4.8%. It should improve with the new refinancing plan, but it isn’t a buy just yet.

It can be safe to say that the pharmacy business will be a strong mover in the days ahead, even if the stock market is showing signs of slowing down. If the “patent cliff” materializes in 2014, each of these three companies should be able to benefit while drug manufacturers take a bit of a hit. It is a good time to get into your corner drug store’s stock. Business could be booming soon.

John McKenna has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Investing in Your Corner Drug Store originally appeared on Fool.com and is written by John McKenna.

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