Shares of Walgreens dove early Friday, a day after the pharmacy chain stated it was suspending its dividend, breaking a streak of quarterly shareholder payouts that stretches again greater than 90 years.
The pharmacy chain stated Thursday after markets closed that it made the transfer to strengthen its stability sheet and enhance free money stream as firm leaders attempt to flip round the struggling enterprise.
Walgreens has been coping with skinny prescription reimbursement, rising prices, persistent theft and inflation-sensitive customers who’re searching for bargains elsewhere. The corporate is within the early levels of a plan to shut 1,200 of its roughly 8,500 U.S. places.
The corporate stated in a quick assertion Thursday that its money wants over the subsequent a number of years for issues like litigation and debt refinancing have been huge components of the choice to droop the dividend.
Earlier this month, the U.S. Justice Division filed a lawsuit in federal court docket accusing the pharmacy chain of filling tens of millions of prescriptions and not using a respectable goal, together with some for harmful quantities of opioids.
In September, the corporate stated it will pay $106 million to settle separate litigation over false cost claims.
Walgreens began final yr by reducing the quarterly dividend practically in half. The corporate slashed the payout to 25 cents from 48 cents after spending about $1.7 billion on money dividends in fiscal 2023.
Chief Monetary Officer Manmohan Mahajan informed analysts earlier this month that Walgreens nonetheless was evaluating “the appropriateness and dimension of our dividend as a part of our capital allocation coverage.”
The suspension was “prudent and considerably overdue,” Leerink Companions analyst Michael Cherny stated Thursday in a analysis be aware. He added that the divided had “turn out to be out of whack” when it comes to its yield and the money it required.
There have been solely two dividend suspensions final yr within the S&P 500, together with one from the chipmaker Intel. There typically are only some annually.
A dividend suspension “is sending a sign to the entire world that I’ve an issue, and it’s money stream and it’s not quick time period,” stated Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
However he added that markets incessantly see a dividend suspension as a optimistic signal initially as a result of the corporate acknowledges it has an issue and is taking a step to right it.
The corporate says it has paid money dividends each quarter since 1933, a streak stretching greater than 90 years or practically 370 straight quarters.
Shares of Walgreens Boots Alliance Inc., primarily based in Deerfield, Illinois, have been down greater than 11% to $10.16 in premarket buying and selling.