We recently compiled a list of the 12 52-Week Low Dividend Stocks To Consider. In this article, we are going to take a look at where Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stands against the other 52-week low dividend stocks.
Dividend stocks have noticeably lagged over the past year or so, with tech stocks dominating the spotlight. However, with major tech companies beginning to implement dividend policies, there is renewed optimism for investors, offering a mix of growth and dividend potential. Currently, all eyes are on the Fed’s upcoming decision on interest rate cuts, which could significantly benefit dividend-paying stocks.
While keeping an eye on the future performance of dividend stocks is crucial, it’s also wise to look back and see how these equities have weathered different market storms. A report from S&P Dow Jones Indices revealed that dividends have been crucial in generating overall equity returns. Since 1926, dividends have accounted for about 32% of the total return for the broader market, with capital appreciation contributing 68%. Consequently, both reliable dividend income and the potential for capital appreciation are key factors in setting expectations for total returns.
Also read: 14 Best 52-Week High Stocks to Buy According to Short Sellers
Inflation is rarely a friend to investments, as the past year has demonstrated. However, dividend stocks have historically held their ground during periods of high inflation. In the 1940s, 1960s, and 1970s—decades characterized by high inflation and total returns below 10%—dividends made a significant contribution to overall returns, as reported by Hartford Funds.
Among dividend strategies, the Dividend Aristocrats Index is the most well-known, tracking companies with at least 25 consecutive years of dividend growth. These stocks are generally less volatile than other asset classes, according to S&P Dow Jones Indices. Over the long term, the Dividend Aristocrats have outperformed the broader market with lower volatility, resulting in higher risk-adjusted returns. The index’s ability to protect against downside risk is evident in its capture ratios: it has outperformed the market in 69.34% of down months and 43.61% of up months. Moreover, the Dividend Aristocrats experienced a smaller drawdown compared to the benchmark index.
Analysts believe that the movement of returns on investments is shaped by market forces. Daniel Peris, a portfolio manager with Federated Hermes and author of a recent book on the future of dividends, suggested that stock market price appreciation alone might not meet the needs of income-seeking investors in the coming years. This, he believed, would likely drive companies to increase their payouts to remain competitive with cash and bonds. He indicated that more companies might start offering dividends and make them a more significant part of their value proposition. However, investors need to be cautious when investing in dividend equities. According to Michael Clarfeld, who manages the Dividend Strategy portfolios at ClearBridge Investments, dividend investing is about making informed decisions by examining a company’s cash flows and how they distribute payouts to investors.
The recent dip in the performance of dividend stocks has made them more attractive to investors. The Dividend Aristocrats Index has seen an increase of nearly 9% since the beginning of 2024, while the broader market has returned 16.5%. These stocks could present a good entry point for investors due to the steady income they offer, providing stability and predictability for a portfolio during volatile times. Given this, we will take a look at some of the best 52-week low stocks that pay dividends.
Our Methodology:
For this article, we first listed down all dividend stocks that recently hit their 52-week lows. We then used Insider Monkey’s exclusive database of 912 leading hedge funds to get the hedge fund sentiment for each stock. Finally, we narrowed our list to 12 of these stocks that had the highest number of hedge fund investors, as tracked by Insider Monkey in Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 35
1-Year Share Price Decline as of September 4: 60.5%
52 Week Range: $8.56 – $27.05
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) ranks fifth on our list of the best 52-week low stocks that pay dividends. The Illinois-based retail company has struggled since the beginning of the year. It suffered a significant blow when it reduced its dividend by half, after nearly five decades of increases. Additionally, the company has faced difficulties due to competition from online retailers and pressure from pharmacy benefit managers (PBMs). The stock has declined by nearly 68% in value since the start of 2024.
Despite recent challenges, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) may still be a solid dividend investment. In fiscal Q3 2024, it generated $605 million in operating cash flow and reported $334 million in free cash flow. Over the first nine months of the year, the company paid more than $1 billion in dividends to shareholders. Additionally, its cost-saving measures provide a somewhat optimistic outlook for the company’s future. This was also highlighted by Ariel Investments in its Q2 2024 investor letter. Here is what the firm said:
“Alternatively, shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), underperformed following an earnings miss and significant reduction to full year guidance, largely due to continued weakness in its U.S. retail business. In response, management announced a multi-year plan for the U.S. business to reduce the retail footprint, invest in the customer experience, align the retail and healthcare businesses for enhanced go-to-market capabilities and simplify the healthcare portfolio. Meanwhile, the company continues to execute on its cost savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium-term, we expect a re-rating in shares as WBA’s new CEO rebuilds the leadership team and earns credibility by executing on previously articulated strategic imperatives as well as margin.”
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) offers a quarterly dividend of $0.25 per share and has a dividend yield of 11.66%, as of September 4.
Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 35 funds owned stakes in Walgreens Boots Alliance, Inc. (NASDAQ:WBA), down from 41 in the previous quarter. These stakes have a consolidated value of roughly $427 million. With over 5.6 million shares, 8 Knots Management was the company’s leading stakeholder in Q2.
Overall WBA ranks 5th on our list of the 52-week low dividend stocks to consider. While we acknowledge the potential for WBA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WBA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
