Walgreens is suspending its quarterly dividend payments after 92 consecutive years, the company said Thursday.
The drugstore said the decision by its board of directors to pause the quarterly payments to investors is necessary as the company continues to pursue several long-term turnaround initiatives.
Walgreens said it’s working to improve its balance sheet by reducing debt over time and improving free cash flow. In a statement, the company said “cash needs over the next several years, including with respect to litigation and debt refinancing, were important considerations as part of the decision to suspend the dividend.”
The Department of Justice is suing Walgreens for allegedly filling millions of controlled substance prescriptions for more than a decade without properly verifying their medical purpose or validity. The company has countersued, seeking court clarification of the controlled substance dispensing rules. It also issued a statement defending its pharmacists.
Rival retailer Rite Aid faced a similar lawsuit from the DOJ in 2023. The company filed for Chapter 11 that year, in part to settle more than 1,600 opioid-related lawsuits. It emerged from bankruptcy as a private company and settled with the government over how it dispensed controlled substances.
The company in October declared a quarterly dividend of 25 cents per share, and overall, paid $1.00 in dividends in 2024. The company cut its dividend to 25 cents from 48 cents a year ago.
“This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and healthcare businesses, which we believe will ultimately improve shareholder value,” CEO Tim Wentworth said at the time.
The dividend suspension is the company’s latest move to cut costs as it implements turnaround measures. The initiatives include a plan announced in October to close 1,200 stores over the next three years. The company confirmed it would lay off about 250 people who held support center roles later that month.
“The cornerstone of our turnaround is stabilizing the U.S. retail pharmacy business and we showed progress across several key planks of this plan,” Wentworth said during a Jan. 10 earnings call, per a Seeking Alpha transcript. “We’ve begun our footprint optimization program and are pleased with the early results.”
Earlier this month, Walgreens reported Q1 revenue rose 7.5% year over year to $39.5 billion. However, the company still posted a $265 million net loss. Comparable sales rose 8.5% in Q1 from a year ago.