Walgreens Slashed Its Dividend, but That's a Good Thing for Investors
A dividend cut is usually awful news for investors. No one wants to be collecting less dividend income. And it's a sign that the business isn't doing particularly well. However, if investors have already been waiting for a dividend cut for some time because they see that the company is struggling and that the payout is unsustainable, a reduction in the dividend may not be all bad.
Walgreens Boots Alliance (NASDAQ: WBA) recently announced a significant dividend cut, resulting in its future payout being reduced to nearly half of what it was. It sounds awful, but here's why this seismic reduction in the payout may turn out to be a long-term good thing for the pharmacy retailer's shareholders.
The new dividend for Walgreens investors will be $0.25 per share every quarter. That's a 48% reduction from the $0.48-per-share quarterly payment it was making last year. Investors will now collect $1 per share every year, putting the yield at 4% based on current share prices, which is still far higher than the S&P 500 average of 1.5%. While Walgreens could have tried to keep last year's payout going, it was simply unsustainable.
Source Fool.com
