By Austen Hufford

Updated June 28, 2018 8:21 a.m. ET

Walgreens Boots Alliance Inc. plans to repurchase as much as $10 billion of its shares and raised its dividend, as the drugstore chain and newest Dow component becomes the latest company to return additional capital to investors following the new U.S. tax law.

U.S. companies have been buying back their shares at an aggressive pace, raising questions about the way that the new corporate tax cuts are being used.

Walgreens, which also on Thursday reported stronger sales and profits in its third quarter, said its effective tax rate was 7.6%, compared with 12.4% in the same quarter a year before.

Health-care companies have pledged to work to reduce rising drug prices. For Walgreens, comparable pharmacy-sales growth in the U.S. was flat in its latest quarter, as higher prices on branded drugs were offset by reimbursement pressures and the impact of generic drugs. Comparable pharmacy sales decreased 1.7% abroad.

Comparable retail sales fell 3.8% in the U.S. and 1.3% on a constant-currency basis internationally.

Walgreens, which replaced General Electric Co. in the Dow Jones Industrial Average this week, has expanded in recent years by merging with European drug wholesaler Alliance Boots and buying up stores from rival Rite Aid Corp. The company, whose roots date back to 1901, has more than 13,200 stores across 11 countries.

Walgreens raised its quarterly dividend to 44 cents from 40 cents. The 10% dividend increase is higher than those the company has implemented in recent years.

The company also increased the low end of its earnings guidance for the year by 5 cents a share. It now expects earnings per share of $5.90 to $6.05.

In all for the third quarter, Walgreens posted a profit of $1.34 billion, or $1.35 a share, compared with a profit of $1.16 billion, or $1.07 a share, in the year-ago period. On an adjusted basis, earnings per share came in at $1.53, above the $1.48 expected by analysts polled by FactSet.

Bolstered by the acquisition of Rite Aid stores, sales rose 14% to $34.33 billion. Analysts had expected the company to report $34.1 billion in sales.

Walgreens shares were flat in premarket trading.

Write to Austen Hufford at austen.hufford@wsj.com