Walt Disney Stock: A Dividend Analysis

The Walt Disney Company (DIS) is one of the largest diversified international companies specializing in entertainment, media, parks, resorts, and various consumer products. Disney owns some of the most recognized TV channels in the U.S., including Disney, ABC, and ESPN.

The company also operates highly popular amusement parks around the world and produces movies, cartoons, and shows for kids and adults. With its highly recognized brand and a very profitable sports channel, Walt Disney was able to grow its net income to $12.6 billion in 2018. However, the company suffered a loss of $2.83 billion in 2020 and $2.02 billion in 2021. This was due to the impact of the COVID-19 pandemic: the parks, experiences, and products segment of the company brought in around 10 billion U.S. dollars less in 2020 than in 2019.

As a result of its successful financial performance over the past, the company was able to consistently pay and increase dividends year after year, making Walt Disney an attractive option for income-seeking investors.

However, the company suspended its semi-annual cash dividend in July 2020 due to the impact of the COVID-pandemic, and has yet to reinstate it.

Key Takeaways

  • Disney's dividend over the last decade was strong as the company has a payout ratio of less than 28%.
  • The semi-annual dividend of $0.88 a share was suspended in July 2020 due to the COVID-related economic impact.
  • The annualized dividend yield on Disney's common stock would have been 1.22% as of the market close on Nov. 16, 2020.

Disney Dividend Policy

Until 2020, Disney consistently paid dividends over 40 years, and it had a track record of increasing its dividend. Disney raised its dividend per share from $0.84 to a semi-annual cash dividend of $0.84 per share in 2018 until it was suspended in 2020.

The company paid annual dividends (i.e. once per year) for the three years prior to 2015 and quarterly before that. Disney increased its dividend by 33% since going to a semi-annual pay structure. Over the past, Disney's payout ratio has ranged from 15% and 30%. The payout ratio was roughly 28% before the suspension of the dividends.

While Disney didn't disclose how it determined its dividends, the payouts were likely contingent on the company's performance and especially its ability to generate sufficient operating cash flows to cover its investment and financing requirements.

Disney Dividend Yield

Disney's dividend yield was dependent on the dividend policy established by the company's board of directors and how the stock price changes. Over the years preceding the pandemic, Disney's dividend yield ranged from 1.2% to 1.8%, which was low compared to its average media peers. Disney's low dividend yield could be attributed primarily to its stock appreciation and the company's emphasis on stock buybacks rather than dividends.

Some companies, such as Disney, prefer generating shareholders' returns through share buybacks rather than paying cash dividends since buybacks typically defer taxes for investors.

Will Disney Dividend Yield Be Reinstated?

In 2019 fiscal year, the last before the pandemic disrupted the business, Disney paid cash dividends of $2.9 billion. In 2020 the dividend was suspended to conserve cash and ensure the company's survival. As of August 2021, all of Disney's theme parks opened again and its other businesses came back online, which makes investors believe that Disney could reinstate its dividend next quarter.

Disney CFO Christine McCarthy declared the company's intention to pay a dividend again: "In light of the ongoing recovery from the COVID-19 pandemic as well as our continued prioritization of investments that support our growth initiatives, the board decided not to declare or pay a dividend for the first half of fiscal 2021. Longer-term, we do anticipate that both dividends and share repurchases will remain a part of our capital allocation strategy."

If Disney decides to pay a dividend again, it isn't required to be the same figure. It could be higher or lower, depending on the company's operating results and balance sheet.

Disney's Income, Debt and Dividend Over the Years

Disney's television and movie business lines coupled with its extensive franchising operations enabled the company to increase its net income from $7.5 billion in 2014 to over $12 billion in 2018, before the pandemic impacted the company and change the figures dramatically:

  • Net income for the quarter ending Sept. 30, 2021, was $0.159B, a 122.39% increase year-over-year.
  • Net income for the twelve months ending Sept. 30, 2021, was $1.995B, a 169.66% increase year-over-year.
  • Annual net income for 2021 was $1.995B, a 169.66% decline from 2020.

According to Walt Disney's most recent financial statement as of Aug. 12, 2021, total debt is at $55.84 billion ($51.11 billion in long-term debt and $4.73 billion in current debt). The company has a net debt of $39.77 billion after subtracting $16.07 billion in cash equivalents.

Disney's Prospects

Disney enjoys a highly favorable position within media networks with its premier channels ESPN and ESPN2, which have exclusive deals with the National Football League. The company's sports channels charge some of the highest fees among similar channels and generate some of the highest revenue streams from advertising.

The Disney Channel is also one of the most trusted channels among parents who subscribe to media content for their kids. Yet, Disney's broadcasting business is continuing to see some softness as consumers drop cable subscriptions and switch to Internet TV offerings. This development is likely to generate some headwinds for Disney and may slow down the company's growth in operating cash flows.

Disney is also generating an increasing amount of revenue from its characters by issuing franchising rights. As the company diversified its characters and franchises by purchasing cartoon and movie studios, such as Pixar, Lucasfilm, and Marvel, Disney has been able to expand its portfolio of characters and appeal to a much broader audience. Disney has also launched a Netflix (NFLX) competitor with Disney+. As the company continues creating movie hits and generating growing franchising sales, these revenue streams could offset any declines in Disney's broadcasting business and provide a sound foundation to restart its dividends. Although management has reiterated its commitment to doing so, a date hasn't been announced.

Article Sources

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  1. Statista. "Net income of the Walt Disney Company in the fiscal years worldwide from 2006 to 2020." Accessed Nov. 27, 2021.

  2. The Walt Disney Company. "The Walt Disney Company Board Decides To Forgo Next Semi-Annual Cash Dividend," Accessed Nov. 27, 2021.

  3. The Walt Disney Company. "The Walt Disney Company Announces Semi-Annual Cash Dividend of $0.84 Per Share." Accessed Nov. 27, 2021.

  4. Nasdaq. "Could Disney Restart Its Dividend Next Quarter?" Accessed Nov. 27, 2021.

  5. Macrotrends. "Disney Net Income 2006-2021 | DIS." Accessed Nov. 27, 2021.

  6. Bezinga. "A Look Into Walt Disney's Debt." Accessed Nov. 27, 2021.

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