Wednesday, March 9, 2016

Walgreens Boots (WBA)

I don't know about you, but I take a lot more pills than I used to.  And when I need a bandage, heel lift, or hot water bottle, or a flu shot, I often times end up at a Walgreens as they seem to be on every corner.

As a stock for income investors, Walgreens, symbol WBA, is a  bit weak on the dividend yield metric but it has a lot of good fundamentals as you can see below.

It is important to note that Walgreens entered into a relationship with Boots Alliance which in the company's words created the world's first global pharmacy - led and well being enterprise.   So far that has provided for significant revenue growth recently.    I like revenue growth.  Revenue growth is what fuels earnings per share and eventually dividends.  Revenue growth is hard to find.  I don't care how we get there, but we need revenue growth.

Take a look at WBA's 2016 M* fundamentals  in the table above and you will see it fails on only one metric and that is yield.  At 1.76% dividend yield investor income is weak.  However, notice that you could supplement that dividend income with covered call income and boost your income by 1.47%.   Add them up and your yield is 3.23%.   If you are clever enough to sell a second call during the year, you boost your yield even more.

Yet, if a company goes out on a limb to create a global alliance, you want to assure yourself that your stock is safe.   Lots of companies expand by issuing debt and that can put your dividend income, not to mention your potential call income at risk.  You must demand a solid balance sheet when you buy a stock.  WBA meets that criteria as well with a very manageable D/E ratio of .4649.

Take a look at the table above.  The values are based on 3/9/2016 data and things can change.  Consider Walgreens Boots because the revenue is growing, the dividend is growing, the balance sheet is strong and you can boost your income by selling covered calls.

M* TheMoneyMadam

Disclosure:  May initiate a position within 72 hours

WBA was a 2012 M* Dividend Machine