Tuesday, December 22, 2009

Walgreen Dividend Signal Seems Broken

Walgreen Co. (WAG) released excellent results and reported cash positions had tripled. They had an excellent flu season which brought in many new customers. The market cap is approximately $36 Billion; give or take a few tens of millions. The yield is a paltry 1.5%. While dividends sometimes signal earnings in this case the earnings are not sending a dividend signal. Wondering if there is a loose connection? Perhaps in the executive suite?

They spent approximately the same amount buying back their stock as they did on dividends. So what is the management strategy? A higher dividend creates a more loyal buy and hold investor. Stock buy backs juice up prices, engineers EPS and rewards stock option’s. Hmm