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Walgreen (WAG)


Guest swf83
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Looking for some thoughts on Walgreen (WAG). I shop there all the time so I became recently very interested in the corporate side of the business. I began doing some due diligence and became extremely attracted to the company and the stock after this pullback from the last few days. The company is generating MASSIVE cash flows. The following is an assessment of the stock from a blog I read:

 

The 200 dma is $33.38 and we will add more if it drops that low, but WAG is accumulating a LOT of cash, and even though they announced a $2 bl share repurchase program with last quarter's results, my guess is the dividend will start getting boosted. In the just-filed 10-q WAG stated that they have targeted a payout ratio of between 30% - 35%, and the payout is currently 22%.

 

The higher dividend makes sense given that WAG's heady growth days are over. It may not be a cash-cow in the corporate life cycle, but it is a mature company as store growth has been cut.

 

Finally, new CEO Greg Wasson has done a tremendous job improving productivity. q1's cash from ops was $1.1 bl, versus $315 ml last year's q1. $600 ml of that increase was working capital improvement, which was badly needed. WAG is getting "lean-and-mean", and a small increase in front-end business will go a long way to the bottom line down the road. (This is a different company operationally than what we knew in the last 1990's and for most of the 2000's.)

 

Any thoughts on WAG? I bought my first batch of shares today, with more to come.

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A few years ago when WAG was in the mid 40s I calculated the long-term CAGR (since the mid 1960s) and it was about 14% which ranks it up there with Exxon, Coke, etc.

 

 

They are moving into our area and have no hesitation building a store right next to the drugstore of an established chain.  Like Publix' moving in on Kroger, they view the competition as little more than a nuisance.

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