The Walgreens Boots Alliance (WBA 0.57%) just made a historic move. After 47 consecutive years of dividend increases, the company slashed its payout. The drugstore chain has suffered from flattening sales, an expensive legal settlement over opioid claims, and struggling medical clinics.

Still, the dividend cut was a dramatic move when the company was three years short of Dividend King status. The question for investors is whether the drop in the stock makes Walgreens a buy, or if this retail stock will bring further illness to investor portfolios.

Why Walgreens slashed its payout

Admittedly, many investors are probably not surprised the company made this decision. The drugstore business has become increasingly competitive as more customers turn to retailers like Walmart, Costco Wholesale, and, more recently, Amazon to fill prescriptions.

Moreover, Walgreens and some of its competitors were found liable for enabling the opioid crisis, a crisis responsible for an estimated 500,000 deaths over 20 years. Walgreens' share of the settlement called for $5.7 billion in payments over 15 years.

Walgreens had attempted to derive growth by opening VillageMD medical clinics within its pharmacies. However, the company announced in October it would close 60 underperforming clinics amid a strategy to cut $1 billion in costs.

Now the dividend has become the next cost Walgreens has cut. The annual payout will fall from $1.92 to $1.00 per share, saving the company around $797 million. When considering the $788 million in negative free cash flow in the first quarter of fiscal 2024 (ended Nov. 30) on top of the other challenges, the company may have had little choice but to lower its dividend burden.

Where Walgreens stands now

Unfortunately, the lower dividend costs may not be enough to draw fans into the stock. Investors will still earn a dividend yield of approximately 4.25% after the dividend cut, well above the S&P 500's 1.5% average.

Fiscal Q1 revenue rose 10% to $37 billion. Still, the rising cost of goods sold led to a slightly lower gross profit. Also, Walgreens reported a net loss of $278 million in the quarter. With only $784 million in cash, it holds little cushion to sustain losses and maintain the remainder of its dividend for long.

In the future, it forecasts breaking even for adjusted EBITDA in fiscal 2024. Nonetheless, this is adjusted EBITDA, which implies losses will continue for the foreseeable future.

Additionally, the fact that it has shuttered many of the VillageMD medical clinics bodes poorly for that growth, leaving the drugstore giant without an obvious path for sustainable revenue increases.

Avoid Walgreens Boots stock

Unfortunately for Walgreens shareholders, the dividend cut is likely not enough to turn the stock around. The company continues to suffer from multiple chronic conditions, and nothing on its shelves offers a cure.

A lower dividend burden will save it a significant amount of cash. However, the company faces intense competition, a high-cost opioid settlement, and the poor performance of its clinics.

Moreover, walking away from 47 years of dividend increases will likely diminish confidence in the stock. With that streak gone, the company has considerable incentive to cut the dividend further as the pain continues. Hence, investors should probably consider selling this stock to prevent further portfolio contagion.