By almost any yardstick, Walt Disney (DIS -0.12%) had an outstanding first quarter of 2022. With the deprivations of the pandemic receding, revenue ballooned and profitability shot skyward. The shutdowns that put "closed" signs on the company's beloved theme parks seem to be a thing of the past, and the Disney+ streaming service is adding millions of subscribers.
Bucking the general trend of the stock market, Disney shares have been on quite the tear since the company reported those results in early February. I'm a shareholder of The Mouse so I'm grateful for this; however, there's one item that was very conspicuous by its absence in that otherwise glowing earnings report.
That item was the dividend. Across the entirety of Disney's nearly 20-page Q1 earnings release, a variation of that word appears exactly once...in a generic blurb that would fit into nearly any publicly traded company's quarterly update.
("Management believes that information about free cash flow provides investors with an important perspective on the cash available to service debt obligations, make strategic acquisitions and investments and pay dividends or repurchase shares." Gee, no kidding, guys).
As a shareholder, I have to be concerned about The Mouse's near-complete lack of attention to the dividend.
While it's never been the No. 1 reason for investors to buy and Disney wasn't particularly renowned as a dividend stock, it did matter. The company was one of the steadiest and most reliable dividend payers in the entertainment sector, with a distribution paid regularly for over 40 years before it was suspended in mid-2020. A regular payout makes any stock more attractive, no matter its underlying value.
And although Disney is the 300-pound gorilla of the entertainment industry these days, there are other big players in the sector for investors to buy, and more than a few of these pay dividends.
For example, Paramount Global has had its struggles, but it owns a huge content library that could make its Paramount+ streaming service a bigger winner if more compellingly marketed. The company's dividend yields a relatively high 3.5%. Comcast's yield is thinner at 2.3%, but it also has a well-stocked streamer (Peacock) and, like Disney, makes decent coin by operating popular theme parks.
A taboo topic?
Thankfully, there's almost no chance Disney will suspend its dividend forever. Investors keep discussing it, even if management is lately sidestepping the topic in the company's official communications. More than a few pundits speculate that it'll make a comeback later this year; my fellow Fool contributor Parkev Tatevosian points out that the company has more than enough cash in its coffers to do so if it desires.
All the same, I'm not comfortable with the company's near-total silence on the matter -- the last official pronouncement seems to be CEO Bob Chapek's remark last October that dividend reinstatement is something that could occur "sort of in the distant future." That's not very reassuring, Bob.
Look, Disney is a very savvy company, and it knows how to build a monster business and grow its already-considerable operations. It also has a good handle on what shareholders want, a wish list topped by those once-dependable payouts. I do think it'll reinstate the dividend sooner rather than later. I only wish The Mouse would squeak a little louder about its plans.