Walgreens Boots Alliance Inc (WBA): 40 Consecutive Years of Dividend Growth & Counting

Finally, you have the dividend component. With a current yield around 1.7%, Walgreens doesn’t exactly win any awards for high yield. However, given a very strong and fast growing underlying earnings base coupled with a moderate payout ratio the dividend could certainly continue to increase at a robust rate.

Once you add in the dividend, using the above assumptions, you might be looking at annual returns in the 8% to 9% range. As a point of reference, that’s the sort of thing that could turn a $10,000 starting investment into $23,000 or so after a decade.

Final Thoughts on Walgreens Boots Alliance

This is how I’d start to think about an investment in Walgreens Boots Alliance Inc (NASDAQ:WBA). First, I’d review the history and think about the interaction of business performance and security performance. Over the past decade Walgreens’ business has been very solid, but not all of that was captured by today’s investor as a result of the decrease in the earnings multiple.

Today the valuation appears more reasonable, but it’s still well within the realm of possibility that future returns could again trail business results as the P/E ratio declines. This doesn’t have to hold, but it’s something that I would consider as a possibility nonetheless. Still, this aspect alone does not indicate that an investment today cannot be worthwhile.

Especially if the company is able to achieve its goal of low double-digit earnings growth, a bit of P/E compression could still result in solid annualized gains. And to be sure the results could be much better should the earnings multiple remain where it is or even increase. Today’s valuation proposition for Walgreens is based on a few factors: the quality of the business, whether or not the anticipated growth actually formulizes and the interaction of this growth with the current earnings multiple.

Walgreens currently ranks in the Top 30 high quality dividend growth stocks using The 8 Rules of Dividend Investing. The company ranks highly due to its stability, low payout ratio, and excellent growth prospects going forward.

Walgreens stock will become even more attractive if the price-to-earnings ratio continues to decline (which would also increase yield).

Note: This article is written by Eli Inkrot and originally published at Sure Dividend.