Dividend Aristocrats Part 42: Walgreens Boots Alliance Inc (WBA)

Valuation

Walgreens Boots Alliance is trading for a forward price-to-earnings multiple of around 18.3. The company has double-digit expected total returns. For comparison, the S&P 500’s forward price-to-earnings multiple is 15.8.

The company is trading in line with its historical average dividend yield since 2007.

Based on these facts, I believe Walgreens Boots Alliance is trading around fair value at current prices given its above-average total return prospects and strong competitive advantage.

Recession Performance

Walgreens Boots Alliance has historically performed well through recessions. The company’s prescription refill driven store traffic flows in regardless of the overall economy. People need their prescriptions refilled no matter what is happening in the stock market.

Walgreens Boots Alliance’s earnings-per-share through the Great Recession of 2007 to 2009 are shown below to illustrate the company’s recession resistance.

– 2007 Earnings-per-share of $2.03 (new high)

– 2008 Earnings-per-share of $2.17 (new high)

– 2009 Earnings-per-share of $2.02 (recession low)

– 2010 Earnings-per-share of $2.16 (partial recovery)

– 2011 Earnings-per-share of $2.64 (new high)

Final Thoughts

Walgreens Boots Alliance Inc (NASDAQ:WBA) ranks in the Top 60 based on the 8 Rules of Dividend Investing due to its above-average growth rate and expected total returns, combined with a slightly below average stock price standard deviation of 27.3%.

Walgreens Boots Alliance is benefiting from favorable long-term trends in the health care industry. I believe there are better choices in the health care sector today, but there is no doubt that Walgreens Boots Alliance is a high quality dividend growth stock with a long growth runway ahead.

Observant shareholders should watch the company’s management as their acquisition-fueled growth could run counter to shareholder interests. For now, the company’s acquisitions have been accretive to shareholder value.

Disclosure: None