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Disney Raised Its Dividends

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Dividend hike

Late on Wednesday, Walt Disney’s (DIS) board announced it would hike the company’s semi-annual dividends. The company has raised its semi-annual dividend levels to $0.88 per share by 4.8% from the prior semi-annual dividend levels of $0.84. The new semi-annual dividend of $0.88 will be paid on January 10, 2019, to shareholders of record as of December 10. The company’s new semi-annual dividend of $0.88 would bring its total dividends for fiscal 2019 to $1.76 per share. The company last paid its semi-annual dividend of $0.84 per share in July 2018.

At the end of November 29, 2018, Disney’s dividend yield stood at 1.52%. Meanwhile, Comcast’s (CMCSA) dividend yield was 1.94% compared to CBS’s (CBS) 1.30% and News Corporation’s (NWS) 1.47%.

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Disney’s strong balance sheet

At the end of September 29, 2018, cash flow from operations rose 8% YoY to $3.85 billion. Cash provided by operations in fiscal 2018 increased 16% YoY to $14.3 billion due to lower income tax payments, a decrease in pension contributions, and higher segment operating income. However, higher film and television production spending and development of a real estate property in New York partially offset the increase.

Free cash flow, however, declined ~1% YoY to $2.65 billion in the fourth quarter. Free cash flow increased 12.7% YoY in fiscal 2018, even though capital expenditures increased from $3.6 billion to $4.5 billion in the fiscal year driven by higher spending on new attractions at the domestic parks and resorts and on technology at BAMTech. However, the company witnessed lower spending at its Hong Kong Disneyland Resort and Shanghai Disney Resort.

In the third quarter, Disney announced it would stop repurchasing shares, as it wants to increase the company’s leverage amid its acquisition of media assets from 21st Century Fox (FOXA). 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. Meanwhile, Disney expects to resume share repurchases after it improves its cash-to-debt ratio with a single A credit rating.

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