Walgreens suspends dividend after over 90 years

USA – Walgreens has announced the suspension of its quarterly dividend, marking the end of a tradition that spanned more than 90 years.

The decision, shared late Thursday, sent the company’s shares tumbling over 11% in premarket trading the next day. This move aims to stabilize Walgreens’ finances as it faces multiple challenges.

The company explained that suspending the dividend would help strengthen its balance sheet and increase free cash flow.

This step is part of a larger strategy to address financial pressures, including litigation expenses and debt refinancing needs.

“The suspension was prudent and somewhat overdue,” noted Michael Cherny, an analyst at Leerink Partners, adding that the dividend had become unsustainable in terms of its cash demands.

Walgreens, which operates roughly 8,500 U.S. locations, is also in the early stages of a plan to close 1,200 stores.

Rising costs, persistent theft, and pressure from cost-conscious shoppers have added to the company’s struggles. Thin prescription reimbursements have further strained its business.

Legal troubles have also mounted. Earlier this month, the U.S. Justice Department filed a lawsuit against Walgreens, accusing the company of improperly filling millions of prescriptions, including opioids.

In September, Walgreens agreed to pay US $106 million to settle separate litigation related to false payment claims.

The company had already slashed its dividend last year, reducing quarterly payouts from 48 cents to 25 cents, after spending US $1.7 billion on cash dividends in fiscal 2023.

CFO Manmohan Mahajan recently indicated that the company was reassessing its dividend policy as part of its broader capital allocation strategy.

While the suspension signals financial struggles, some see it as a positive step. “A dividend suspension is sending a signal to the whole world that I have a problem, and it’s cash flow, and it’s not short term,” said Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.

However, he added that markets sometimes view such moves favorably, as they indicate a company is taking steps to address its challenges.

Walgreens, based in Deerfield, Illinois, has proudly paid quarterly dividends since 1933, covering nearly 370 consecutive quarters.