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Walgreens beefs up its dividend
July 8th, 2009
DEERFIELD, Ill. – In a show of confidence about its strategic plans and financial performance, Walgreen Co. on Wednesday hoisted its quarterly dividend by 22.2%.
The drug store chain's board of directors raised the quarterly dividend to 13.75 cents per share from 11.25 cents per share. The dividend is payable Sept. 12 to shareholders of record as of Aug. 21. The company said the increase lifts the annual rate from 45 cents per share to 55 cents per share.
“This dividend increase reiterates our confidence in our key growth strategies and our ability to generate strong free cash flow in the future,” Greg Wasson, Walgreens president and chief executive officer, said in a statement. “This is a good next step in our continuing effort to provide meaningful returns to our shareholders.”
The move stands to provide a measure of reassurance to investors. Though Walgreens posted robust sales gains for its fiscal 2009 third quarter ended May 31, costs related to its company restructuring and store optimization initiatives — namely, Rewiring For Growth and Customer-Centric Retailing (CCR) — hurt profit. Earnings for the quarter came in at $522 million, or 53 cents per diluted share, down 8.8% from a year earlier.
Wall Street had forecast the chain's earnings at 56 cents per share for the quarter. Analysts seemed caught a bit off guard by the profit drop, as well as by a dip in gross margin. That led some to lower their near-term earnings forecast for the company, saying that the cost impact of strategic initiatives — despite their huge potential upside over the long term — may last longer than they expected.
Walgreens said it has paid a dividend in 307 straight quarters (more than 76 years) and has increased its dividend for 34 straight years, adding that it has raised its dividend by an average compound annual rate of more than 21% over the last five years.