Disney (DIS) Dividend Snapshot – The Magic Kingdom of Cash Flow

I have Frozen 2 songs stuck in my head all day long. Ok, I actually really liked the movie and the music, I admit it as a man in his mid 40’s! Disney company has a remarkable collection of content and the ability to monetize everything. Here is a stock overview:
  • Disney appears to be a good long term stock to own, it is a media and entertainment giant that owns amazing amounts of intellectual property that sells all over the world.
  • They should be increasing their modest dividend in the near term.
  • They are preparing for the future with strategic moves with on demand entertainment at home and major acquisition actions such as Fox.
  • Ticker DIS trading at a discount about $85/share after Coronavirus fears. The P/E ratio is about 14. Dividend is .86 per share, pays semi-annually, 2% yield
So much gold in this cave, must be time for a Disney acquisition.
Many of us have warm and fond memories of Disneyland, Disney World or Disney films. The brand brings back all kinds of nostalgia by design. There is something ancient in our DNA about good storytelling, it seems to be one of the magic elements that makes us human and built the modern world. Snow White, Cinderella, Bed Knobs & Broom Sticks, Mary Poppins, Peter Pan, Winnie the Pooh, The Little Mermaid, Who Framed Roger Rabbit, the stuff of magic and imagination. Not only the stuff of magic, but also the stuff of huge cash flow and a huge pirate’s treasure chest of intellectual and creative property!

Content, content, content

Disney’s content is second to none, people love it. Their Direct to Consumer efforts may pay huge dividends down the line. In other words, they are position themselves to deliver their content directly to people’s homes with the click of a button. And look at Amazon, people love to click away!   I still remember being inspired to draw cartoons and illustrations after watching many of these Disney classics. Jerry and I took our families to Disneyland this year and it was as magical as ever! It was also hot, crowded and expensive, but for me still worth the experience. I saw hundreds of families lined up to shell out $25 for a pair of mouse ears, the good folks at Disney know how to sell fun stuff! In terms of the stock, many analysts are positive on Disney and say patient investors will be rewarded.

There are Pirates coming after your gold!

From a big picture perspective Disney’s reach is vast. They operate in media networks, parks & resorts, studio entertainment and interactive media.

The Force is Strong with This One

Disney makes some rather powerful acquisitions of intellectual property. Think back to 2012 when they acquired Lucasfilm and all the rights to Star Wars for $4 Billion. It sounds like a lot of money, but I bet they make it back in huge numbers over the years. Disney is a media & entertainment powerhouse. Their dividend is somewhat low at a 1.5% yield, but appears poised to grow at about a 15% rate. Disney boasts very strong cash flow and seems to be positioning itself well for the future. Disney is making strategic maneuvers too with Hulu to be well positioned to offer customers everything Disney has to offer at the touch of a button in the comfort of their homes. They are probably a bit stingy with the dividend due to the cash they use to make major acquisition bids for other media giants like Fox. In the last quarter Disney generated about $3.2 billion in cash flow. Seems like enough to keep “It’s A Small World” up and running.  

Stock Analysis

Let’s see how Disney stock holds up to a few stock analysis criteria? CRITERIA FOR LONG TERM HOLD DIVIDEND STOCKS A. Price/Earnings Ratio: The P/E ratio simply helps an investor determine whether a stock is over or under valued. The S&P 500 average is The average P/E for the S&P 500 has been around 15. So a company with a current P/E of 25, above the S&P average, trades at 25 times earnings. The high multiple indicates that investors expect higher growth from the company compared to the overall market. A high P/E doesn’t necessarily mean a stock is overvalued. Any P/E ratio needs to be considered against the backdrop of the P/Es for the company’s industry. Too high of a P/E ratio can mean the stock is overvalued. In other words, look for a moderate P/E value to indicate you are not buying the stock at the top!

DIS is at a 13.69 P/E currently. Seems that the stock is about right or perhaps a bit undervalued.

  B. Earnings per share, EP/share: This is the total earnings divided by the number of outstanding shares of stock. This is important because you will want to know if the company turns a healthy profit and would then be able to return either dividends and/or value back to shareholders.

DIS has an EPS of about $1.50/share. EPS is a comparison thing based on expectations and the industry, but DIS is clearing making a profit as compared to outstanding shares which is a great sign.

  C. Dividend Aristocrat or King: Numerous studies have shown that dividends make up a big percentage of total stock returns. Estimates suggest that stocks returned about 9.4% annually between 1900 and 2010 and that dividends made up 4.4 percentage points of this return. If a company has returned a dividend for 25 or more years, they are a Dividend Aristocrat. If they have paid a dividend for over 50 years they are a Dividend King. A good example is Johnson & Johnson with 53 years of dividend increases.

DIS has over 60 years of history paying dividends. This has fluctuated a bit as the business made adjustments and investments, but overall this a great history.

  D. Dividend yield:The dividend yield is calculated by dividing the annual dividend by the share price. The average S&P 500 yield is around 2.5%-3%. I like a nice healthy 3% or maybe a bit more. The only problem if you get too high is that the company may not be able to sustain it. So beware of sky high yields, it may be short lived. Companies have to balance sharing profits with shareholders with investing back into the business for new equipment, space, marketing, etc. to continue to grow the company.

DIS yield is 3.18%, which puts it in line with reasonable S&P 500 companies

 

Disney “shares”

Beyond the shares of stock, did you know the actual old school physical stock certificates are worth a lot of money now. We love garage sales and estate sales at The Money Vikings! These are excellent opportunities to find great stuff and sometimes hidden treasurers. I recently discovered this vintage Disney share certificate for $10! Share certificates are now collector’s items. Check out the amazing marketplace on E Bay for fun. I don’t think companies issue these anymore. Disney sadly stopped in 2013. I always loved the artwork on the Disney certificate. This thing might be worth several shares and hold its value! Don’t miss opportunities to check out garage sales and estate sales, you never know what treasure you may find.

Found this baby at a garage sale!

http://oracle.davidkanter.com/2018/07/16/disneyland-family-memories-easy-ways-to-save-part-1/

Movies, Avengers Infinity Gauntlet

Movies like the Star Wars franchise and Avengers have propelled box office sales. These movies just continue to captivate and entertain large audiences internationally. One thing to keep in mind that Disney is selling their entertainment products around the world. As more folks desire to become part of the middle class, they seek out and have a bit more time for pure entertainment and enjoyment in life, and Disney delivers the goods. http://oracle.davidkanter.com/2018/04/25/the-infinity-gauntlet-1-a-great-return-on-investment/ As always, this is not stock picking or financial advice to anyone. See a financial planning professional.

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