Over the past year I’ve been buying Walgreens(WBA) stock when it was below $40. I try to make it a rule to not buy more of a stock once it’s gone up unless I feel it’s still severely undervalued or I find some good news on it. Well, I had to buy more at $52 and I’ll tell you why. I’m not even close to a financial advisor and you can probably tell by the quality of this article!
Why I Was Already Bullish
Walgreens has a decent balance sheet with over $87 billion in assets compared to $66 billion in liabilities. They have one of the most attractive dividends with a 3.55% dividend and they raise it every year. The reason they always steadily raise it and never cut it is because they have a healthy 35% payout ratio. Among that, this big named pharmacy is just simply undervalued with a 76.19 trailing P/E ratio with a forward P/E of 10.06. This means the stock has room to rise.
Why I’m Even More Bullish
Months ago Walgreens announced that they will be opening 500-700 clinics built into their stores. They teamed up with VillageMD to build up to 700 stores within the next five years. This I have known. But there was a small(sarcasm) detail that I missed that got me excited. Walgreens invested $1 billion in VillageMD to build these new clinics. And in return they get a whopping 30% ownership in VillageMD. To me, this is huge news. VillageMD brings in an estimated $150 million per year in revenue from their 200+ clinics. Add on 500-700 more clinics, more foot traffic in their stores and that will be a nice payday for WBA.
Walgreens could be the best dividend stock/growth stock combo in the stock market in my personal opinion. If it drops into the $40’s I may buy more.