Disney’s Strategy Is Paying Dividends
Disney’s dividend yield
The Walt Disney Company (DIS) announced on June 24, 2015, that it has increased its annual dividend by 15% and will pay it on a semi-annual basis. It announced a dividend of $0.66 per share for 1H15. This is the first time the company has increased the frequency of its dividend payments to twice a year. This news bodes well for Disney’s investors.
Disney has had a five-year average dividend yield of 1.1%. A dividend yield is a measure of the company’s annual dividend per share relative to its price per share. It indicates how much cash an investor is getting for every dollar invested in the company’s equity.
As the above graph shows, compared to Disney, only Time Warner (TWX) had a higher five-year average dividend yield at 2.2%. CBS (CBS) and 21st Century Fox (FOXA) had lower dividend yields at 1.1% and 0.9%, respectively.
Disney stated in its 2Q15 earnings call, “Fiscal year-to-date, we’ve returned about $3.9 billion dollars to our shareholders via dividends and buybacks, including roughly $2 billion dollars in share repurchases.”
Disney’s value proposition
Disney’s net income was $4.2 billion in 1H15, an increase of 14% from $3.7 billion in 1H14. This indicates that the company’s growth strategy is reaping dividends.
Disney stands out from its competitors in the media industry because of its vast IP (intellectual property). The company is monetizing these assets successfully across its segments. It’s doing this through the creation of content that utilizes its intellectual property by retailing merchandise, creating console games, and adding attractions at its theme parks that showcase its characters.
There’s no dearth of buyers for Disney’s content across multiple platforms, from Netflix (NFLX) to YouTube (GOOG). Even if Disney’s ESPN is going through some difficult times, the company’s IP should allow it to withstand competition in the long run.
You can get a diversified exposure to Disney by investing in the SPDR S&P 500 ETF (SPY), which holds 1.00% of the stock.