At the pandemic's onset, Walt Disney (DIS 0.67%) had to close its doors on several businesses that contribute significantly to its bottom line. Management quickly realized that closing theme parks, hotels, and retail shops could severely harm its cash flows. 

As a result, it prudently suspended its dividend to conserve cash and ensure The House of Mouse survives the pandemic. Thankfully, economies are reopening -- albeit in fits and starts -- as the world is vaccinating populations against COVID-19. All of Disney's theme parks are open again and its other businesses are coming back online. The positive developments have shareholders asking: Could Disney reinstate its dividend next quarter? 

Seven smiling people on a green amusement park ride.

Disney paid $2.9 billion in dividends in fiscal 2019. Image source: Getty Images.

A bloated balance sheet 

Disney CFO Christine McCarthy recently reiterated the company's long-term commitment to paying a dividend, saying: "In light of the ongoing recovery from the COVID-19 pandemic as well as our continued prioritization of investments that support our growth initiatives, the board decided not to declare or pay a dividend for the first half of fiscal 2021. Longer-term, we do anticipate that both dividends and share repurchases will remain a part of our capital allocation strategy."

In its 2019 fiscal year, the last before the pandemic disrupted its business, Disney paid cash dividends of $2.9 billion. When Disney decides to pay a dividend again, it isn't required to pay the same figure. Disney could choose to pay a lower amount -- or higher one to make up for the lost time.

Still, what amount the dividend restarts at and when it restarts will ultimately depend on the company's operating results and balance sheet. Management will not pay a dividend if it is not in the best interest of the company. For its fiscal year's first nine months, ended July 3, Disney generated $2.9 billion in cash from operations -- bringing cash, cash equivalents, and receivables to $29.4 billion. Meanwhile, it had over $51 billion in long-term debt. 

Disney is certainly holding an elevated level of cash and debt. That's understandable. The pandemic led management to take extraordinary measures. But now that operations have reopened and are progressing nicely, management is likely considering reducing its debt load and returning cash to shareholders. Importantly, if it chooses to use cash to pay back debt, that would lower the interest expense it has to pay, thus increasing cash flows. 

Investor takeaway 

If management continues to move cautiously in returning cash to shareholders, the mostly likely reason will be the now-prevalent delta variant and its ability to spread. On the other hand, if infections caused by COVID-19 are under control when Disney reports earnings next quarter, management might announce a restart to its dividend. The company has no trouble generating vast amounts of cash if no deadly virus is getting in its way.  

Disney is likely to take a conservative approach, considering it does not want to play a game of restart and pause. If there are continued risks to operations caused by the coronavirus, the dividend is likely to stay on hold.