This Is 1 Incredible CEO

The Motley Fool readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting shareholder interests and those of the public first and are generally deserving of kudos from investors. For reference, here is last week's selection.

This week, we'll take a closer look at how CEO Gregory Wasson of Walgreen (NYSE: WAG  ) has waded through a sea of bad news yet still continues to deliver for both shareholders and the American workforce.

Kudos to you, Mr. Wasson
Go ahead and scratch your head, because that's going to be the initial reaction for most investors who are familiar with Walgreen and its recently ended spat with pharmacy-benefit-management services company Express Scripts (Nasdaq: ESRX  ) .

Express Scripts sued Walgreen over breach of contract last year for purportedly disparaging the company and attempting to lessen the amount of new enrollees in Express Scripts' network. Although Express Scripts dropped the suit in early June, the damage has been done. Millions of consumers within Express Scripts' network have been forced to find new prescription homes with CVS Caremark (NYSE: CVS  ) and Rite Aid (NYSE: RAD  ) , both of which have recently noted pharmacy growth thanks to the Walgreen-Express Scripts dispute.

Despite all of this, Walgreen still has a solid plan to grow its business, a plan to reward shareholders for the patience, and a way to get America moving again.

Walgreen's plan to boost growth once again was outlined last week when it formed a strategic partnership with Alliance Boots to become the world's first pharmacy-driven health and well-being retailer, as well as a large purchaser of prescription medicines. Wall Street might be iffy about this deal's prospects, but given managements' insistence that cost synergies would run $100 million-$150 million and earnings would be accretive by $0.23-$0.27 within the first year, I'd say I'm sold on its success. This deal has the potential to invigorate growth beyond what it lost from Express Scripts with promises of $1 billion in cost synergies by 2016.

A step above his peers
But I'm not done! Not only does Mr. Wasson have a plan to get Walgreen back on track, but he plans to boost shareholder morale by putting more money in their pockets yet again. Considering the exodus of Express Scripts customers, Walgreen could very easily have maintained its dividend and conserved its cash. Instead, Walgreen raised its dividend by 22% to $0.275 quarterly, marking the fourth major dividend increase in just the past three years. Just take a look at this nearly exponential dividend growth in recent years:


 

Source: Dividata. *Estimated payments assuming $0.275 quarterly payout.

Houston, we are go for rewarding our shareholders! Walgreen has now raised its dividend for 37 consecutive years and has made it evident that rewarding shareholders with a payout ratio of 30% to 35% of its earnings is part of its growth plans. Walgreen's new yield of 3.7% absolutely trounces its peers'. CVS yields only 1.4%, Rite Aid is too busy trying to dig its way out of nearly $6 billion in net debt to worry about rewarding its shareholders with a dividend, and even consumer do-it-all Wal-Mart (NYSE: WMT  ) , whose low-cost pharmacy business is a primary stop for low-to-moderate income families, only offers a yield of 2.4%.

Two thumbs-up
Finally, with unemployment figures running above 8% and employment growth slowing, I wouldn't have been surprised to see Walgreen reducing its staff to conserve money. Oh how wrong I would have been. Although Walgreen has seen sporadic layoffs in Florida, its new store additions in Chicago that added 600 jobs in 2011 more than offset the jobs it has jettisoned recently. Add Walgreen to the list of employers helping to put America back to work.

Wasson may be unpopular given that Walgreen's stock is near a new 52-week low, but he has a plan to get Walgreen growing again, has more than enough cash to reward shareholders for sticking around, and is putting Americans back to work. I'd call that a resounding two thumbs-up to you Mr. Wasson.

Do you have a CEO you'd like to nominate for this prestigious weekly honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just might see your nominee in the spotlight.

Here at the Fool, we love management teams that have strong track records of rewarding their shareholders, which is why I invite you to download a copy of our latest special report, "Secure Your Future With 9 Rock-Solid Dividend Stocks." This report contains a wide array of companies and sectors that are likely to keep your best interests in mind, just like Walgreen, whether the market is up or down. Best of all, it's completely free for a limited time, so don't miss out!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves giving credit when credit is due. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of Express Scripts and creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that strongly believes in doing right by investors.


Read/Post Comments (15) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 29, 2012, at 1:28 PM, sumner11 wrote:

    One thing you didn't bring up in terms of Wasson and Walgreens "putting America back to work" is the fact that the stores' budgeted hours have been severely reduced in the last couple of years to the point where they are operating with "skeleton crews". Also, Walgreens is just now starting a 2-3 year plan to pretty much greatly reduce the pay of its store management teams by restructuring and renaming the positions. Store morale is at an all time low.

  • Report this Comment On June 29, 2012, at 3:47 PM, drgrzz76 wrote:

    "Walgreen & Wasson----- a way to get America moving again." Well since all MGT's which are low level manages who make less then a average American are being told to take a pay cut or leave. I guess this MGT is going to be moving to UNEMPLOYEEMENT. This article is a Walgreens paid hit job.

  • Report this Comment On June 29, 2012, at 4:18 PM, jjackusto wrote:

    First I agree with drgrzz 100 %.

    "Despite all of this, Walgreen still has a solid plan to grow its business, a plan to reward shareholders for the patience, and a way to get America moving again"

    I think this plan is pretty much just for the shareholders only and not for the american workforce. Walgreens is wiping out the assistant manager position with a new title and lesser pay ABOUT $5-$7.

    WALGREENS saving alot of money by doing this moves but IS IT REALLY MAKING AMERICA MOVES into the right direction???

    This is the same thing as laying off the employees and they'll find a new job with lesser pay. It will make american moves into the UNEMPLOYMENT line and government assistance.

    Are you agree with me Sean??? I hope the next time you write an article about CEO of a company, You would find out from the inside of those company too not just on the surface.

  • Report this Comment On June 29, 2012, at 11:50 PM, CTadvocate wrote:

    Walgreens shuld hold it's head up, it has done well for years where Rite Aid shuld be embarrased to even call itself a drugstore...

  • Report this Comment On June 29, 2012, at 11:51 PM, CTadvocate wrote:

    oops....meant SHOULD

  • Report this Comment On June 30, 2012, at 4:36 AM, KenKnows wrote:

    Whoever wrote this article has not been in a Walgreens store.. First, who would let billions and billions of dollars of business go to the wayside except a fool.. Express Scrips knows Walgreens are fools.. Then, this idiot let's the best techs in the pharmacy business quit for new jobs since their hours have been cut.. Then, this monster cuts the managements pay by 6 dollars an hour while giving himself millions in bonus money.. Then he borrows billions of dollars to buy a company from europe where their economy is so unstable that most countries are about to go bankrupt, which is where Walgreens is headed.. This is on CEO who should be fired.. He is truly a monster who only cares about his next drink..

  • Report this Comment On June 30, 2012, at 8:19 PM, AgAuMoney wrote:

    Wow, 3 of the 4 critical posts are new registrations. Obvious shills. When is the Fool going to better police their comment systems?

    Just initiated a position in WAG early in June and added to it last week.

  • Report this Comment On July 01, 2012, at 1:45 AM, PillzIsGod wrote:

    @ AgAuMoney: Do you know what a shill is? Someone who acts like they LOVE something, not someone who talks negatively about it. Perhaps we are new because we know how much the company is going downhill, and found this "Happy days, there's nothing wrong with Walgreens" article and are able to see that it's BS?

    You're the real fake, blaming the site's moderators for not censoring valid opinions.

  • Report this Comment On July 01, 2012, at 8:16 PM, drgrzz76 wrote:

    @ AgAuMoney----- I am glad you initiated a position in WAG in June and added to it. I have had a position for 13 years. I post under this name and have over the years. I suggest you walk into a Walgreens and ask the manager what is going on. This article is a slap in the face of every low level manager. On Monday Febuary 6, 2009 Wasson put out a 4pm email that immediately all low level managers (coded MGT) had to take a 15% cut in pay. This was done in the middle of a pay and work week. The simple key stroke wiped out 15% of pay for 20 thousand plus. So I am sorry if some have hard feeling about this joke of a article.

  • Report this Comment On July 01, 2012, at 9:08 PM, jagoodhue wrote:

    greg wasson is probably the worst ceo the walgreen company has ever had-he is clueless in regards to employess-he his a beancounter only -alliance-what a joke-walgreens stock will never reach 32.0o0 in the next five years-let's bring back the thinking of fred canning-you are too young to know who he was-fred canning-ceo of walgreens-he is the one that made walgreenswhat is today

  • Report this Comment On July 03, 2012, at 2:58 AM, mattstash wrote:

    "delivers for the American workforce." What a F-ing Joke! Wasson and his "Walmart boys" have destroyed the culture at Walgreens. Google: Walgreens forum topix.

  • Report this Comment On July 05, 2012, at 2:00 AM, got2bWendy wrote:

    Sean ~~ In regards to Wasson and Walgreen's, your research was superficial at best, and highly questionable at worst. The ever increasing turmoil within Walgreen's would make for a great episode on CNBC's program, American Greed.

    While you may be sold on the increased dividend, many shareholders are alarmed that the stock has gone down approximately 35% in the last year.

    As for helping to put America back to work.......oh yeah, that's right, the underemployed are not represented in the the monthly unemployment numbers released by the government. Sean, it really is not as good as you would like your readers to believe.

  • Report this Comment On July 06, 2012, at 12:32 PM, mako9652 wrote:

    One of Charles R. Walgreen, Jr.’s most enduring contributions to the company that his father founded has been the Four-Way Test, written by a friend at Rotary International and adapted for Walgreens in 1955. Based on the ethical business principles he learned from his father, these four questions are the foundation of the Walgreen Way:

    1. Is it the truth?

    2. Is it fair to all concerned?

    3. Will it build goodwill and better friendship?

    4. Will it be beneficial to all concerned?

    I doubt that the current management has the same vision.

    In 2010, Walgreen had a fight with CVS Caremark. Their pharmacy became a frontline for the war against CVS/ Caremark. Instead of spending the time on the proper use of medication, the staff talked about the unfairness of the CVS contract and rallied their customers to petition and to take sides. Walgreen won out at the end.

    In 2011, the current CEO and upper management took the hard-line stand again. The staffs were again asking customer to change insurance, contacting HR, and signing petitions.

    Walgreen patients were being used as pawns in this fight between Walgreen and Express Script.

    I could only guess that with the victory of CVS/ Caremark fresh in mind, Mr. Wasson smiled for another win. Who would dare to leave their 7500 stores network?

    The toughest part for a business is to get the customer in the door. Now you tell someone that you do not accept his or her insurance. Unless they had Alzheimers, do you think they’ll return the next time? Both the pharmacy and the store suffer not just once but for potential future sales. You want to create a habit of people shopping at your store. Your name is the first one that pops up in their head, as in a google search. Now Walgreen has chosen to exclude 20-30% of their customer base in refusing Express Script.

    Medco has just merged with Express Script. Walgreen stands to lose additional business from Medco customers when their contracts come up for renewal.

    It had been six months. Express Script is learning from this experience of what they feared most, the loss of the 7500 pharmacies Walgreen network. This is valuable information for future negotiations against Walgreen by Express Scripts and CVS/Caremark.

    On top of that, they have helped Rite-aid, which was on the blink of collapse; and have further strengthen the position for CVS.

    Next year, when CVS/ Caremark come up for negotiation, do you think they will offer a “BETTER” deal than that of Express Script? I don’t think so.

    I have not seen any business willingly turns away up to 40% of the potential customer and thrives.

    I don’t know what Mr. Wasson is thinking. He may have bluffed and now he is in a no win situation.

    To minimize the appearance of impact from the Express Script blunder, Walgreen had been trying all kind of trick and initiatives the past six months. But you can only cut so much, push so much, cover up so much before the truth comes out.

    It’s like a ship runs aground and the captain want to go full speed ahead. Meanwhile, Mr. Wasson gave himself a big pay raise.

    At the current price of $30 and with a 3% dividend, it may be a buy. But if you have bought the stock at a higher price…it’s going to be a very long wait.

    Wow, Walgreen has just dropped because of the announcement for buying stake in some U.K. pharmacy chain. They have also raised the dividend knowing that the stores are not doing well. Instead of focusing on their core business, now they’ll be all over the world.

    7/6

    The raise in dividend is but a way to please the stock holder while the smoke and screen continues to mask the loss from the Express Script blunder

    Sean: since 2008, benefits and work hours have been cut drastically...the money went to the bottom line. I can agree that Walgreen may be a buy at this level, but an incredible CEO...sorry to say, you don't know what you're writing about

  • Report this Comment On July 07, 2012, at 10:13 AM, wagpam wrote:

    Every year we lay off pharmacy techs. The pay rates are low and the raises are low. Manager are facing no raises and lower bonuses. Asst are facing pay cuts or job losses. Wasson is not great. Morale is very low and in this years survey put out by walgreens that employees answers there large number of employees worried about the finanical future of walgreens.

  • Report this Comment On July 07, 2012, at 8:49 PM, wagslave wrote:

    From an employee's perspective, Walgreen is not interested in putting America back to work at a living wage. The comment about under-employment describes the jobs available at Walgreens. In addition to low pay, the health benefits are unaffordable to many. In my opinion, Walgreens does not value its employees and its evident in the low morale. Many of us are actively seeking other employment and will gladly leave when given the opportunity. Reading the article, I would think you wrote about a company other than Walgreen.

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