A detailed quantitative analysis by the Walgreens Boots Alliance, Inc. (WBA) is linked here. Below are some highlights from the analysis linked above:
Company description: Walgreens Boots Alliance, Inc. is the top-selling US drug retail chain. The company operates more than 8,000 drug stores in the United States and Puerto Rico.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
WBA trades at a discount of just 1.) above. Since the material book value of the WBA is not meaningful, a Graham number cannot be calculated. Including the NPV MMA differential, the stock is trading at a premium of 31.7% on the calculated fair value of $ 39.9. WBA didn’t deserve any stars in this area.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend growth rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
WBA received two stars in this section for 1.) and 3.) above. A star was earned because the free cash flow payout ratio was less than 60% and there were no negative free cash flows in the last 10 years. WBA received a star for an acceptable score on at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1933 and has increased its dividend payments for 46 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
The NPV MMA Diff. of the $ 452 is below the $ 500 target I’m looking for for a stock that has increased dividends as long as the WBA has done so. The stock’s current yield of 3.56% exceeds the estimated average MMA rate of 2.74% for 20 years.
Peers: The company’s peer group includes: CVS Caremark Corporation (CVS) with a yield of 2.7%, Rite Aid Corp. (RAD) with a yield of 0.0% and Wal-Mart Stores Inc. (WMT) with a yield of 1.7%.
Conclusion: WBA did not deserve any stars in the Fair Value category, two stars in the Dividend Analytical Data category and no stars for a total of two stars in the Dividend Income vs. MMA category. This means that WBA is quantitatively referred to as 2 star weak Camp.
With my D4L-PreScreen.xls Model, I decided that the stock price would have to drop to $ 50.82 before WBA’s NPV MMA differential rose to the minimum of $ 500 that I’m looking for on a stock with 46 years of consecutive dividend increases. At that price, the stock would generate a return of 3.7%.
Resetting the D4L-PreScreen.xls The dividend growth rate model and solution required to generate the targeted MMA differential of $ 500. The calculated rate is 2.5%. This dividend growth rate is above the 2.2% used in this analysis, so there is no margin of safety. WBA has one Risk assessment of 1.75, which it classifies as a medium risk stock.
WBA offers unmatched convenience with one of the most recognized brand names in the pharmacy business. The company has a strong market share in the relatively stable US retail industry. Competitors like Wal-Mart and CVS continue to put WBA’s market share under pressure. The stock is trading above my calculated fair value of $ 39.90 and its yield of around 3.6% is historically attractive. For now, I’ll be waiting for a more favorable time to open a position in the WBA.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks they should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I did not hold a position in the WBA (0.0% of my dividend growth portfolio).
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Tags: WBA, CVS, RAD, WMT,