Is Disney Stock Worth Owning for Income Investors?
Walt Disney Co (NYSE: DIS) has been around since 1923 and has been paying dividends for quite some time. But unlike other companies with decades of dividend paying history, Disney stock hasn’t really been known as a top dividend stock. Is the company worth owning for income investors? Let’s take a look.
Founded on October 16, 1923 by Walt Disney and Roy O. Disney, the company started out as the Disney Brothers Cartoon Studio. Through its iconic characters such as Mickey Mouse and animated productions such as Snow White and the Seven Dwarfs, Disney became one of leading companies in America’s animation industry. The company completed its initial public offering (IPO) in 1957 and was added to the Dow Jones Industrial Average in 1991. Today, Disney is a diversified multinational mass media and entertainment conglomerate, commanding $180.0 billion of market cap.
Because of the company’s enormous growth over the years, long-term investors in Disney stock have been handsomely rewarded. If an investor bought shares of DIS stock 50 years ago and held on to them to this day, they would have made a return of 54,181% with dividends reinvested.
The most impressive part is that Disney was not operating in an industry known for producing solid dividend payers. Making movies is a risky business that can involve high levels of investments. Still, thanks to one successful release after another, Disney found a way to generate recurring business relatively early.
Source: StockCharts.com
Today’s Disney is much more than making animated films. To see whether Disney is a good income stock, we are going to take a look at Disney stock’s current dividend policy, its dividend history, growth prospects, and everything you need to know about DIS stock from an income investor’s perspective.
- Disney Stock Dividend History
- Disney Stock Dividend Per Share
- Disney Stock Current Dividend Policy
- When Is Disney’s Ex-Dividend Date?
- Will Disney Raise Its Dividend?
- What to Expect from Disney in 2017
- Will Disney Stock Become a Dividend Aristocrat?
- Disney Stock Split History
- Will Disney Stock Split in 2017?
- Disney Stock Dividend Reinvestment Plan (DRIP)
Disney Stock Dividend Data
| Dividend Yield | Annualized Payout | Payout Ratio | Dividend Growth |
| 1.37% | $1.56 | 24.8% | 7 Years |
#1 Disney Stock Dividend History
While Disney went public in 1957, said public was actually able to collect dividends from the company long before that. This is because Disney issued its six-percent cumulative convertible preferred shares in 1940. Due to losses incurred in 1941, the company was not able to pay the preferred dividend for a while. But note that since the preferred stock was cumulative, Disney is required to pay the missed dividends to those preferred shareholders when it starts to pay dividends again. The company resumed its dividends in 1947 and made up the missed dividends by 1949. Disney redeemed its preferred stock in 1951, paying all the dividends it promised.
The Disney stock we know today began trading on the New York Stock Exchange in 1957. The company has been paying dividends to shareholders ever since. Disney has paid quarterly dividends, semi-annual dividends, and annual dividends. For a company with such a long history and so many changes to its operations over the years, its most recent dividend history is perhaps of the most value for income investors that are considering Disney stock.
From 2000 to 2014, Disney was paying annual dividends with several payout increases. The company then moved to paying dividends on a semi-annual basis in 2015. Its first semi-annual payment of $0.66 per share paid in July 2015 represented 14.8% increase from its previous dividend rate. And that was just the start. Disney raised its dividend again that year; it was a 7.6% sequential increase to $0.71 per share announced in December 2015. So in 2015, the company declared a total of $1.37 of dividends per share, up 19.1% from 2014.
Disney’s latest dividend hike was announced in November 2016. The 9.9% increase brought the company’s semi-annual dividend rate to $0.78 per share. On an annualized basis, Disney’s dividend has increased 108% in the last five years, translating to a compound annual growth rate of over 20%. The company has raised its payout every year since 2010.
The table below shows Disney’s dividend per share history for the past 10 years.
#2 Disney Stock Dividend Per Share
| Declaration Date | Ex-Dividend Date | Record Date | Payment Date | Amount |
|---|---|---|---|---|
| 2016/11/30 | 2016/12/08 | 2016/12/12 | 2017/01/11 | $0.7800 |
| 2016/06/29 | 2016/07/07 | 2016/07/11 | 2016/07/28 | $0.7100 |
| 2015/12/02 | 2015/12/10 | 2015/12/14 | 2016/01/11 | $0.7100 |
| 2015/06/24 | 2015/07/01 | 2015/07/06 | 2015/07/29 | $0.6600 |
| 2014/12/03 | 2014/12/11 | 2014/12/15 | 2015/01/08 | $1.1500 |
| 2013/12/04 | 2013/12/12 | 2013/12/16 | 2014/01/16 | $0.8600 |
| 2012/11/28 | 2012/12/06 | 2012/12/10 | 2012/12/28 | $0.7500 |
| 2011/11/30 | 2011/12/14 | 2011/12/16 | 2012/01/18 | $0.6000 |
| 2010/12/01 | 2010/12/09 | 2010/12/13 | 2011/01/18 | $0.4000 |
| 2009/12/02 | 2009/12/10 | 2009/12/14 | 2010/01/19 | $0.3500 |
| 2008/12/03 | 2008/12/11 | 2008/12/15 | 2009/01/20 | $0.3500 |
| 2007/11/28 | 2007/12/05 | 2007/12/07 | 2008/01/11 | $0.3500 |
Source: Walt Disney Co
#3 Disney Stock Current Dividend Policy
To be honest, Disney is far from being the most popular dividend stock. Even though the company has a pretty long dividend history, it doesn’t enjoy the same status as the other top dividend stocks that income investors are well familiar with. The reason behind that might be its not-so-substantial yield and its not-so-frequent dividend payments.
In today’s stock market, most companies that pay a dividend distribute it on a quarterly basis. Companies may also pay dividends every month, every six months, or every year; right now, Disney stock dividends fall into the semi-annual category. The company’s most recent dividend announcement came November 30, 2016, when its board of directors declared a semi-annual cash dividend of $0.78 per share. That represented a 9.9% increase from its previous dividend payout of $0.71 per share. (Source: “The Walt Disney Company Declares Semi-Annual Cash Dividend of $0.78 Per Share,” Walt Disney Co, November 30, 2017.)
With the new semi-annual dividend rate, Disney stock investors will be getting $1.56 on a yearly basis. At today’s price, that translates to an annual dividend yield of 1.37%, which is below the S&P 500’s average dividend yield of 1.96%. (Source: “S&P 500 Dividend Yield,” Multpl.com, last accessed April 13, 2017.)
#4 When Is Disney’s Ex-Dividend Date?
To receive Disney stock’s dividends, an investor must own shares of the company before the ex-dividend date. The ex-dividend date is usually set to be two days before the record date.
Disney has yet to announce its next dividend. The company’s previous dividend of $0.78 per share was paid on January 11, 2017. The record date was December 12, 2016, with the ex-dividend date being two business days prior, on December 8.
#5 Will Disney Raise Its Dividend?
Of course, past performance does not mean future results are assured. While the company has a long history of paying dividends, what Disney stock investors really care about is whether those payouts will continue to grow in the future. To analyze Disney stock’s dividend growth potential, let’s take a look at the company’s business.
Disney might be known for its iconic cartoon characters, but the company is about much more than just Snow White and Mickey Mouse these days. Today’s Disney operates through four segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products and Interactive Media.
Media Networks: This segment consists of a vast array of broadcast, cable, radio, publishing and digital businesses, such as ABC, Freeform, ESPN, and the Disney Channel.
Parks and Resorts: Disney has a huge fan base around the world. With millions of guests visiting various Disney theme parks and resorts every year, Parks and Resorts have been a money-making machine for the company.
Studio Entertainment: If you like going to the movies, you will likely have seen quite a few productions from this segment. Some of the recent blockbuster films from Disney’s Studio Entertainment include Rogue One: A Star Wars Story, Finding Dory, and Zootopia.
Disney Consumer Products and Interactive Media: This segment provides another great monetizing opportunity for Disney. The segment also includes Disney Publishing Worldwide and the Disney Store chain.
Disney did quite well in its fiscal 2016, which ended October 1, 2016. For the fiscal year, the company generated $55.6 billion in revenue, representing a six-percent increase from the prior year and setting a new record. Net income increased 12% to a record $9.4 billion, while earnings per share (EPS) came in at $5.73, up 17% year-over-year and also setting a new record. (Source: “The Walt Disney Company Reports Fourth Quarter And Full Year Earnings For Fiscal 2016,” Walt Disney Co, November 10, 2016.)
“Fiscal 2016 was our sixth consecutive year of record results, highlighted by the opening of Shanghai Disney Resort, the phenomenally successful return of Star Wars, and our Studio’s record-breaking $7.5 billion in total box office,” remarked Disney Chairman and Chief Executive Officer Bob Iger. “We remain confident that Disney will continue to deliver strong growth over the long-term as we further strengthen our brands and franchises, our technological capabilities, and our international presences.”
With such great performance, you would expect Disney stock to show some upward momentum, but that wasn’t the case for the most part of the company’s fiscal 2016. As a matter of fact, from November 2015 to October 2016, Disney stock plunged more than 23%.
Why would a company’s stock price tumble so much while delivering record results on both top and bottom lines? The answer lies in Disney’s Media Networks segment.
Media Networks is currently Disney’s biggest segment, accounting for 42.6% of the company’s total revenue. While the segment grew its revenue by two percent in fiscal 2016, its operating income stayed flat. What’s more is the concern that as people move from watching cable TV to on-demand video streaming, Disney’s Media Networks will see business further decline.
The biggest sub-segment of the company’s Media Networks is Cable Networks. In the fourth quarter of Disney’s fiscal 2016, Cable Networks experienced a seven-percent decline in revenue and a 13% decline in operating income. This was mainly due to decreases at ESPN and the Disney Channel.
The thing is that while on-demand video streaming has certainly hurt cable operators, it might not be the end of the world for Disney. You see, cable channels and video streaming don’t have to be two separate things. For instance, the company’s ESPN recently became available on subscription-based streaming TV service DirecTV Now. Moreover, video streaming company Hulu has added both Disney’s ESPN and ABC to its content library. (Source: “Hulu Adds ESPN, ABC and Fox News to Streaming Service,” The New York Times, November 2, 2016.)
Disney’s channels may also have a spot in an online TV service that Alphabet Inc’s (NASDAQ:GOOG) YouTube has reportedly been working on. The Wall Street Journal reported that Disney has signed a deal with YouTube for it to include several Disney networks—including ESPN and ABC—in a service that’s expected to launch sometime later this year. (Source: “Walt Disney Pressured by Sagging ESPN Performance,” The Wall Street Journal, February 7, 2017.)
On top of all this, don’t forget that Disney owns a sizable stake in BAMTech, a video streaming technology company. BAMTech already powers the streaming services for HBO Now, Major League Baseball, and the WWE Network, just to name a few. If Disney decides to launch its own streaming service for its networks, BAMTech could provide critical assistance.
The point is, Disney’s Media Networks is facing some headwinds, but the business far from over. Furthermore, the company has other segments that could be strong growth drivers. Parks and Resorts revenue increased five percent in fiscal 2016, while Studio Entertainment revenue surged 28% over the same period.
Six consecutive years of record results is quite an accomplishment for the Burbank, California-based entertainment giant. Since dividends come from a company’s profits, the best could be yet to come for income investors of Disney stock.
One thing dividend investors should always pay attention to is a company’s payout ratio. The dividend payout ratio is calculated by dividing a company’s annual dividend per share by its EPS. It tells investors how much money the company is returning to shareholders relative to its profits. In Disney’s case, the company declared a total of $1.42 of dividends per share in its fiscal 2016 while earning $5.73 per share, so it was paying out less than 25% of what it earned. A low payout ratio like this leaves a margin for safety and room for future dividend increases.
The company usually reviews its dividend policy once a year. Disney last announced its dividend increase in November 2016. If the company manages to churn out growth in its current fiscal year similar to what it did in the previous one, it should have no problem announcing another dividend hike sometime towards the end of 2017.
#6 What to Expect from Disney in 2017
Disney’s fiscal 2017 began in October 2016, but its first-quarter results are already out. In the three months ended December 31, 2016, the company’s revenue slipped three percent year-over-year to $14.8 billion. Reported EPS came in at $1.55, a 10% decline from the year-ago period. (Source: “The Walt Disney Company Reports First Quarter Earnings For Fiscal 2017,” Walt Disney Co, February 7, 2017.)
Still, Disney’s EPS was better than Wall Street’s expectations of $1.49. Moreover, one of the reasons for the drop in EPS was a gain of $0.13 per share in Disney’s investment in A+E Television Networks in the prior-year quarter. Excluding this gain and other onetime items, the decline in EPS would be a more moderate five percent.
Going forward, Media Networks—and ESPN in particular—could continue being a focus for Disney stock investors. On that front, Disney’s CEO Bob Iger said earlier this year that those concerns might be overblown.
“I think there’s way too much pessimism about ESPN because ESPN is still in demand from three constituents you want to be in demand the most from,” he said. “One – distributors. Two, consumers and three, advertisers. And the reason it’s in demand is the brand is still strong, the product is still good and we’ve invested nicely to keep that product as high quality as possible.” (Source: “Disney’s Bob Iger explains why ‘there’s way too much pessimism about ESPN,’” CNBC, February 7, 2017.)
Don’t forget, the company’s Parks and Resorts and Studio Entertainment segments could keep delivering solid results. By March 2017, almost eight million people have visited Shanghai Disneyland, the company’s first theme park in mainland China which opened in June of last year. The company expects more than 10-million people to visit the theme park by its first anniversary this June. In its movie-making business, Disney has quite a few films that are almost guaranteed to be huge box office hits this year, such as Pirates of the Caribbean: Dead Men Tell No Tales, Guardians of the Galaxy Vol. 2, and Star Wars: The Last Jedi.
The ongoing developments at Disney have made Wall Street quite optimistic about its 2017 results. The consensus revenue estimate for Disney’s fiscal 2017 is $56.88 billion, which would represent a 2.2% expected increase from fiscal 2016. Earnings per share is expected to increase even more, by four percent from the last fiscal year to $5.95. (Source: “The Walt Disney Company (DIS),” Yahoo! Finance, last accessed April 17, 2017.)
#7 Will Disney Stock Become a Dividend Aristocrat?
At Income Investors, we often look at a group of companies called “dividend aristocrats.” These are stocks that have increased their dividends every year for at least 25 consecutive years. The title is not easy to earn, because there are many things that could impact a company’s ability to make dividend payments. Therefore, stocks with dividend aristocrat status likely have some sort of durable competitive advantage that allows them to increase their payout for a quarter of a century.
Given that Disney’s current dividend increase streak started in 2010, it is not Dividend Aristocrat. However, as Chinese philosopher Lao Tzu once said, “A journey of a thousand miles begins with a single step.” Given Disney’s powerful brands, solid operations, low payout ratio, and bright outlook, the company will likely have more profits to share with investors in the future. Although it is far from a dividend aristocrat, Disney stock could earn a less impressive status soon: “dividend achiever,” which is a company with at least 10 years of consecutive dividend increases.
#8 Disney Stock Split History
When a company has been growing its business for decades, its value would likely have gone up enormously. For a publicly traded company like Disney, that increase in value shows up in its stock price. Disney went public in 1957 with an IPO price of $13.88. From the company’s stock chart, we know that its share price has increased enormously. If one share of DIS stock today represents the same as it did back then, it could cost tens of thousands of dollars. But as we know, Disney stock is not trading at these kinds of numbers. Why? Because the company has done plenty of stock splits.
Think about it. If a company has a five-figure stock price and there is a minimum trading parcel, it would deter many small investors from buying its shares. Moreover, when a company’s stock price rises well above its peers, it may give some investors the impression that the stock is expensive, even though valuation involves more factors than stock price alone. That’s why, historically, numerous companies have used stock splits to increase the number of shares outstanding. And since there is no change to the fundamentals, a stock split usually lowers a company’s stock price.
In Disney’s case, the company’s first stock split was actually completed in 1956, which was before its IPO. It was a two-for-split on Disney’s convertible preferred shares trading over the counter.
After Disney stock IPO, the company has split its shares on six different occasions. There were three two-for-one splits, one three-for-one split, and two four-for-one splits. Together, they increased Disney stock’s number of shares outstanding by 384 times.
| Record Date | Payable Date | Type of Split |
| June 19, 1998 | July 9, 1998 | 3-for-1 |
| April 20, 1992 | May 15, 1992 | 4-for-1 |
| February 10, 1986 | March 5, 1986 | 4-for-1 |
| December 6, 1972 | January 15, 1973 | 2-for-1 |
| February 4, 1971 | March 1, 1971 | 2-for-1 |
| October 26, 1967 | November 15, 1967 | 2-for-1 |
| August 17, 1956 | August 20, 1956 | 2-for-1 |
Source: Walt Disney Co
#9 Will Disney Stock Split in 2017?
All six stock splits since Disney went public occurred when the company was trading at above $100.00 apiece, including one time Disney stock price was above $200.00. While the company is far from being the hottest ticker in the market right now, the climb in Disney stock since the last financial crisis has been nothing short of impressive. After bottoming out in February 2009, Disney stock has surged a staggering 575%.
Today, shares of Disney stock trade at $113.20 apiece. While the price is above the $100.00 threshold, it’s not clear how strong the momentum is going forward. As we have seen for the most part of last year, concerns about its ESPN segment due to cord-cutting could weigh in on the stock. Management would probably want to address those concerns before announcing another stock split.
#10 Disney Stock Dividend Reinvestment Plan (DRIP)
A dividend reinvestment plan, or DRIP, allows investors to reinvest their dividends by purchasing additional shares of the company. Disney offers its dividend reinvestment plan through its transfer agent Broadridge Corporate Issuer Solutions Inc. To sign up for the plan, an investor needs to complete an enrollment form and either make an initial cash investment of at least $175.00 or authorize monthly deductions of at least $50.00 to purchase shares of the common stock. Once enrolled, all cash dividends will be automatically reinvested in additional shares of the company. The reinvestment of dividends are usually completed within five business days of the dividend payment date.
Of course, investors that are relying on dividends to cover their monthly expenses may not want to sign up for a dividend reinvestment plan. But for those that don’t need to use the cash immediately, enrolling in DRIPs of solid dividend-paying companies could significantly boost their returns in the long run. DRIPs often save the fees and commissions paid to brokers, unleash the power of compounding, and automatically help investors achieve dollar cost averaging. Investors interested in Disney stock’s dividend reinvestment plan can visit the transfer agent’s web site.