Disney (DIS -0.70%) has been a huge success story for investors, having given longtime shareholders average annual returns of more than 14% for the past half a century. Yet one thing that the member of the Dow Jones Industrials (^DJI -0.17%) hasn't done as well as it could is to reward its investors with high dividends.

Indeed, Disney ranks in the bottom five of the 30 Dow components, and its dividend policy differs from the vast majority of dividend stocks. Many Disney shareholders might prefer it if the entertainment giant would be more forthcoming with dividend increases in the future. Below, we'll take a closer look at Disney's dividend history.

Disney store window

Image source: Getty Images.

Disney's history of dividend payments

Disney has a long history of dividend payments that dates back 60 years, but it hasn't been as consistent about dividend growth as it has in fostering the success of its fundamental business. During much of its history, the company would keep its dividend unchanged for periods of several years and then make a payout increase before another extended period of flat dividends. The net result was slow but steady dividend growth that wasn't nearly as apparent as it was for companies that made a habit of raising their dividends each and every year.

In the late 1980s and 1990s, Disney changed its stripes, making annual dividend increases that were more meaningful. Boosts of 20% or more became commonplace throughout much of that period, and the resulting streak seemed to put Disney on course to join the ranks of other key dividend payers in promoting more regular dividend growth.

DIS Dividend Chart

DIS Dividend data by YCharts. Note: The extent of the jump in 1999-2000 and the drop in 2015-2016 are both misleading, as they reflect changes in Disney's dividend payment frequency from quarterly to annual in 1999 and then to semiannual in 2015.

Yet one of the most interesting things that Disney did with its dividend came in 1999. Until then, Disney had paid dividends on a quarterly basis, like most U.S. companies. However, Disney changed its mind in late 1998, saying that it would start making annual payments instead. The justification that Disney came up with for the move was that because so many individual shareholders hold small numbers of shares of the entertainment giant's stock, processing so many small dividend checks on a quarter basis wasn't cost-effective. Moreover, in many cases, Disney's relative stinginess with how much it paid in dividend resulted in dividend checks for small shareholders that were less than the cost of the postage stamp to mail them.

How Disney has done with its dividends lately

Yet one troubling aspect of the move was that following the switch to annual dividends, Disney stopped boosting them for several years. It wasn't until 2004 that Disney starting boosting the payouts again. The House of Mouse then went through another flat period from 2007 to 2009 in the lead-up to the financial crisis and recession in 2008.

Disney has gotten more aggressive with its dividend growth recently. A 50% rise in 2011 set the stage for aggressive increases, and Disney boosted its dividend frequency to two times per year starting in 2015. The most recent boost came in December, with a 10% rise to take the semiannual payout to $0.78 per share.

What's next for Disney's dividend history?

Many shareholders remain frustrated with Disney despite its recent dividend growth. Investors are still getting a subpar yield of just 1.4%, and the payout represents just 27% of the company's earnings over the past 12 months. There's no doubt that if it wanted to, Disney could dramatically increase its dividends without sacrificing much in terms of available capital for other needs.

Yet Disney shows no signs of doing anything different with its dividends. On the company's most recent quarterly earnings call, one analyst asked how Disney views its balance between dividends and other uses of capital. CFO Christine McCarthy answered, "We also consider dividends, but that's after we invest in our businesses and look at other growth opportunities." In essence, Disney believes it can use its capital better than its shareholders can, and that's why it chooses to keep its yield relatively low.

For income investors, Disney hasn't always delivered the dividend income they would have liked to see. However, the long-term total returns from Disney stock have made most shareholders quite happy with the company.