Walgreens Boots Alliance (WBA) is one of the largest pharmacies in the world. The company boasts more than 13,000 stores in the US, Europe, and Latin America. It also generates more than $130 billion in annual revenue, and has increased its dividend for 47 consecutive years. While the above statistics paint the picture of a ‘boring’ mature dividend growth stock, Walgreens actually has exciting upside valuation potential, explains Ben Reynolds, editor of Sure Dividend.

That’s because its stock price has gone from a high of $97 in 2015 to around $21 in December 2023. In short, some good news for Walgreens could send the stock much higher.

There’s a reason Walgreens’ share price has declined significantly over the last eight years. The company has struggled to grow. Adjusted earnings per share peaked in its fiscal 2018 at $6.02. Adjusted earnings per share have declined since to $3.98 in fiscal 2023. And we expect adjusted earnings per share of $3.35 in fiscal 2024.

In addition to declining earnings, Walgreens has also faced scrutiny and litigation surrounding the opioid epidemic. This has certainly weighed on the share price as well.

All of the negativity surrounding Walgreens is what, paradoxically, makes it such an interesting investment today. We expect adjusted earnings per share of $3.35 in fiscal 2024. This more than covers the current $1.97 per share dividend.

And at recent share price levels, this dividend translates into a dividend yield of more than 9%. This extremely high dividend yield means investors get ‘paid to wait’ for any sort of good news at Walgreens, which could materially increase the share price.

Walgreens recently traded for a price-to-earnings ratio of less than 6.5 times expected fiscal 2024 adjusted earnings per share. If the company were to return to a modest price-to-earnings ratio of 10, that would imply more than 50% upside from recent prices.

One potential catalyst in place for Walgreens is the appointment of the company’s new CEO, Tim Wentworth. Mr. Wentworth became Walgreens’ CEO on Oct. 23. He was most recently the founding CEO of Evernorth, Cigna Group’s (CI) health services organization. He replaces Roz Brewer, who became Walgreens’ CEO in 2021 and stepped down after two disappointing years for the company.

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