Walgreens stock took a hit as the drugstore chain announced a significant cut to its quarterly dividend. The company’s shares fell more than 11% after reporting fiscal first-quarter adjusted earnings and revenue that exceeded expectations but also revealed a drastic reduction in its dividend payout.

Walgreens, a retail pharmacy giant, slashed its dividend from 48 cents per share to 25 cents per share in an effort to fortify its long-term balance sheet and cash position, as stated by CEO Tim Wentworth. This move marks the company’s first dividend cut in nearly five decades, significantly reducing its dividend yield from over 7% to 3.9% based on the previous closing price.

During an interview with CNBC, Wentworth emphasized the importance and responsibility of the decision to cut the dividend. He also expressed that most investors anticipated the move and are enthusiastic about the company’s potential to reinvest the capital in the core business for stimulating growth, ultimately benefiting shareholders.

The dividend reduction comes as Wentworth, a seasoned professional in the health-care industry, strives to navigate Walgreens through a challenging period. The company faced a 30% decline in shares in the previous year due to various factors such as decreased demand for Covid products, low pharmacy reimbursement rates, intensified competition from online retailers, labor disputes among pharmacy staff, and macroeconomic challenges.

Despite the recent dividend cut, Walgreens reiterated its fiscal 2024 adjusted earnings guidance of $3.20 to $3.50 per share. This move is seen as part of the company’s efforts to strengthen its financial position and refocus on driving growth in the core business.

Walgreens’ decision to reduce its dividend payout reflects its commitment to addressing financial concerns and prioritizing long-term sustainability. The company’s ability to adapt to market challenges and implement strategic measures will likely shape its future performance and investor confidence.