Walgreens Boots Alliance Suspends Quarterly Cash Dividend Amid Restructuring Efforts
Walgreens Boots Alliance has suspended its quarterly cash dividend, citing the company’s cash needs over the next several years, including litigation and debt refinancing. The decision comes as the U.S. pharmacy chain operator is undergoing restructuring efforts, including a $1 billion cost-cutting program and exploring options for its non-core businesses.
Shares of the company fell by around 10% on Friday, following the announcement. The dividend suspension is seen as a “prudent and somewhat overdue” move by Leerink Partners analyst Michael Cherny, who believes it will help Walgreens reboot its business. However, the near-term impact is expected to be negative, with forced technical selling likely to occur due to the company no longer being income-generating.
The decision to suspend the dividend comes weeks after the U.S. Department of Justice filed a lawsuit against Walgreens, alleging that the company knowingly filled millions of prescriptions that lacked a legitimate medical purpose. If found liable, Walgreens could face civil penalties of up to $80,850 for each unlawful prescription.
Walgreens, which operates the second-largest pharmacy chain in the U.S., has been under pressure due to persistently low drug reimbursement rates and consumers avoiding high-priced grocery items. The company is planning to shut thousands of stores as part of its restructuring efforts. CEO Tim Wentworth has unveiled a series of changes aimed at kick-starting growth and regaining investor confidence.