Walgreens Acquisitions or Dividends or Both

Walgreens (WAG) printed some great numbers and seems to be on a roll. They are the premier drugstore brand in the USA, with a big footprint in the urban landscape. Some 65% of revenues come from pharmaceutical prescriptions.

Yet they were negatively impacted by a milder than expected cold and flu season. When you become so large you are influenced by demographic demands that are beyond management’s control. So one of the ways to assess this stock is to follow public health information which is not readily available to the investing public.

Management traditionally does not speak to this data. Are the blind leading the blind?

A big cash position has been generated. Inventories have been squeezed down and some fixed assets disposed of. The question becomes what are they going to do with some $3 Billion in cash and near cash. That is approximately 10% of their market cap and they will need to put the money to good use. They have been on the acquisition trail and they have been upgrading their stores.

What is next? Foreign acquisitions may be on the horizon? Given their purchasing power with the pharmaceutical industry they may wish to consolidate the power in other markets and keep the squeeze on.

But first they have to issue the dividend signal. The size of the dividend increase will tell more than the fact the dividend is increasing.