Walgreens Boots Alliance (WBA) has steadily grown its dividend for 40 straight years and has an operating history that dates back more than 100 years.

Few businesses have demonstrated such durability, and the ones that have are always worth a look for our Top 20 Dividend Stocks portfolio. After all, it takes meaningful competitive advantages for a company to survive for such a long period of time.

Walgreens scores extremely well for Dividend Safety (97) and Dividend Growth (88), but there is a lot more to this drugstore’s business drivers than many dividend growth investors perhaps realize.

Business Overview

Walgreens is a global leader in the retail pharmacy market with more than 13,100 stores in 11 countries. Walgreens Boots Alliance’s drugstores sell a range of prescription and non-prescription drugs in addition to a number of consumer products in categories such as beauty, personal care, and grocery.

Walgreens’ roots can be traced back to humble beginnings in Chicago in 1901, but the business has since expanded organically and through major acquisitions to become a leading international player.

Walgreens Boots Alliance operates in three segments. Retail Pharmacy USA is its largest segment and accounted for 69% of sales and 72% of segment income in its first quarter of fiscal 2016. This division consists of Walgreens and Duane Reade branded drugstores in the U.S.

Retail Pharmacy International represented approximately 12% of sales and 18% of segment profits and consists of Alliance Boots, one of the largest drugstores in Europe that Walgreens fully acquired in 2014.

The company also has a Pharmaceutical Wholesale business that generated 20% of sales and about 10% of segment income. This segment operates under the Alliance Healthcare brand and supplies medicines and a variety of healthcare products to over 200,000 pharmacies and other healthcare institutions from more than 350 distribution centers.

Business Analysis

Retail pharmacy is a highly competitive and relatively mature industry. There are few noticeable differences inside of a Walgreens or CVS store, which causes companies in the industry to compete largely on price, brand recognition, and convenience of store locations.

The two major drugstores that dominate the market are Walgreens and CVS. Each player has done its part in consolidating the market.

Walgreens acquired U.S. drugstore chain Duane Reade for $1.1 billion in 2010 and bought a 45% interest in Alliance Boots, a major pharmacy player in Europe, for $6.7 billion in 2012.

The company purchased the rest of Alliance Boots in 2014 to give it a presence in faster-growing international markets and further expand its scale. With Alliance Boots, Walgreens became the biggest buyer of generic drugs in the world and expects to generate at least $1 billion in cost savings.

Most recently, Walgreens announced a deal to acquire Rite-Aid for $17.2 billion in 2015. This acquisition is expected to close in late 2016 and will provide better national coverage for Walgreens’ customers.

Why is the industry consolidating? Essentially, there is a building amount of pressure to take costs out of the healthcare system. Falling government reimbursement rates for prescriptions and consolidation throughout other parts of the healthcare chain are putting pressure on players like Walgreens to take costs out of their businesses.