Linked here is a PDF copy of my detailed analysis of Walgreen Co (WAG). Below are some highlights from the above linked analysis:
Company Description: Walgreen Co is the largest U.S. retail drug chain in terms of revenues. It sells prescription and non-prescription drugs, beauty care, personal care, household items, candy, photofinishing, greeting cards, seasonal items and convenience foods.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
- Rolling 4-yr Div. > 15%
- Dividend Growth Rate
- Years of Div. Growth
- 1-Yr. > 5-Yr Growth
- Payout 15% of avg.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to >MMA
Other: WAG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. WAG should benefit from increased generic drug sales, new Medicare legislation, new store growth and an aging U.S. population. Potential threats would include the growth of non-traditional competitors, such as Wal-Mart (WMT), et. al., and potential legislation changes.
Conclusion: WAG earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of two Stars. This quantitatively ranks WAG as a 2 Star-Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $17.27 before WAG's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. I like to see. At that price WAG would yield 2.41%. As a value investment WAG could possibly have merit. However, as a dividend investment WAG comes up short at this time.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I had no position in WAG (0.0% of my Income Portfolio) and was long in WMT (1.6% of my Income Portfolio).
What are your thoughts on WAG?