Walgreens stock plunges. Its dividend payout changes are to blame

Walgreens Boots Alliance, Inc. investors have had a wild 2025 so far. Earlier this month, the beleaguered stock (Nasdaq: WBA) soared 25% after beating Q1 2025 expectations on revenue and earnings per share. Yet today, the company’s stock is crashing—WBA shares are currently down over 15% in early trading.

But this stock price swing has nothing to do with sales. Instead, it likely has to do with Walgreens’ changes to its dividend payouts. Here’s what you need to know.

Why is Walgreens stock crashing?

As of the time of this writing, Walgreens shares are down over 15% in early market trading. The reason for the crashing stock price likely has to do with a change the company announced to its dividend payouts.

Today’s WBA crash comes after the company announced yesterday that it would be suspending dividend payments to shareholders in order to better manage its capital allocation.

“This change in capital allocation is aimed at strengthening WBA’s balance sheet by reducing debt over time and improving free cash flow, as the company works toward achieving a retail pharmacy-led turnaround underpinned by a sustainable economic model,” the company said in a statement announcing the changes. “The company’s 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.”

News of Walgreens pausing its dividend payments is historic. As the Associated Press notes, Walgreens has been making quarterly dividend payments to shareholders for nearly a century.

What is a dividend?

When it comes to the stock market, a dividend is usually a cash payment a company makes to shareholders. The payment is usually made every quarter and is deposited as cash in the shareholder’s brokerage account. A stockholder receives a set amount of cash for each share they own in the company.

Many companies pay dividends, including tech giants like Apple and Nvidia. Dividends are a way to reward investors for their loyalty by allowing them to profit from the company’s cash stockpiles directly.

Dividends can also act as an incentive to hold onto a stock even if the stock itself isn’t appreciating much in value, as investors are given a cash payout on a recurring schedule—meaning that simply owning the stock earns them recurring income.

What does Walgreens’ pausing of its dividends mean?

It suggests that the company is going to need all the cash it can get its hands on in order to implement its desired turnaround, which is aimed at reducing costs and increasing revenue. Instead of continuing to give cash directly to its investors, Walgreens believes that cash can be better spent on its turnaround efforts—which may benefit investors in the long run.

However, many investors like to invest in stocks that offer dividends. And some of the share price fall in WGA seen this morning could represent some investors dumping their holdings since dividends are no longer being paid.

But the stock price fall could also signal that Walgreens’ turnaround efforts are going to be more challenging and longer-lasting than many thought. That uncertainty may be causing some people to dump the stock this morning.

WGA stock is still up for 2025

Today is the last trading day of January, but despite WGA’s 15% drop in early trading, the stock is actually still up about 3.8% year-to-date—mainly thanks to that 25% jump earlier this month.

However, looking beyond the past month, there’s no denying that Walgreens stock has been headed in the wrong direction for some time. Over the past 12 months, WGA stock is down more than 57%. Over the past five years, the stock has collapsed by around 81%.

The pharmacy chain is facing a number of challenges, including decreased profits, increased online competition, and lower reimbursement rates for prescription drugs. As a result of some of these challenges, last year, the company announced plans to close as many as 1,200 stores.