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Why Disney Suspended Its Share Repurchase Program

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Dividend payments

Walt Disney (DIS) paid its semi-annual dividend of $0.84 per share on July 26 to the shareholders of record on July 9. The company’s semi-annual dividend of $0.84 was higher than the previous year’s semi-annual dividend of $0.78 per share, bringing its total dividends for fiscal 2017 to $1.62 per share. The company last paid its semi-annual dividend of $0.84 in January.

As August 8 ended, Disney’s dividend yield stood at 1.47%. Meanwhile, Comcast’s (CMCSA) dividend yield was 2.17% compared to CBS Corporation’s (CBS) 1.35% and News Corporation’s (NWS) 1.31%.

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Disney to cease share repurchase program

During the quarter, Disney stated that it would stop repurchasing shares, as the company is in the middle of the acquisition of media assets from 21st Century Fox (FOXA) that would increase the company’s leverage. The company has agreed to pay $35.7 billion cash to Fox shareholders as part of its half-cash and half-stock acquisition deal of $71.3 billion. Disney expects to resume share repurchases after it improves its cash-to-debt ratio with an A credit rating.

Disney has returned total capital of $11.8 billion to its shareholders via dividends and buybacks in fiscal 2017. This was higher than $9.8 billion in fiscal 2016, $9.2 billion in fiscal 2015, and $7.0 billion in fiscal 2014. 

Year-to-date on June 30, Disney has repurchased ~$3.6 billion in shares, while it made dividend payments of $1.3 billion. Disney’s management previously predicted that the company could repurchase shares worth $6.0 billion in fiscal 2018.

Disney won Fox deal

Disney acquired its Fox assets after Comcast decided to withdraw from the bidding war for most of the media and entertainment assets of Fox. The long-standing battle between media giants Disney and Comcast ended last month. Comcast plans to focus on buying the 61.0% stake in London-based Sky Plc, in which Fox already has a 39.0% stake.

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