What happened

Shares of Walgreens Boots Alliance (WBA -0.39%) were down more than 9% an hour after the market opened, after the drug store chain released third-quarter earnings. The stock is down more than 24% so far this year.

So what

Walgreens' third-quarter report was seen as a miss on several levels. Earnings per share (EPS) was reported as $0.14, down 59% year over year, with the healthcare company citing lower COVID-19 vaccine and testing volumes as the culprit. The company did see sales of $35.4 billion, up 8.6% over the same period last year, but it also downgraded yearly guidance.

In the report, Walgreens said it expected yearly adjusted EPS of $4 to $4.05, down from earlier estimates of between $4.45 and $4.65, again citing lower COVID-19 related sales and a more cautious consumer. 

Now what

The lowered guidance also may worry dividend investors. The company has raised its quarterly dividend for 47 consecutive years, including a 0.5% boost last July to $0.48 per share, which delivers a yield of around 6.8%. However, the cash dividend payout ratio on that dividend is 76.63%, which may be unsustainable as the company's free cash flow has fallen more than 85% over the past five years.

That cash flow will likely be further reduced with the company closing out its ownership stake in Option Care Health earlier this month, along with a sale of $644 million worth of shares of AmerisourceBergen in May, though Walgreens still owns 17% of that company. The sales will allow Walgreens to reduce its debt, but also will cut into its free cash flow used to pay dividends. If the company does not raise its dividend next month, or cuts it, the stock will likely plummet further.