At the start of the pandemic, Walt Disney (DIS 0.83%) suspended its dividend payment. Now that things have largely returned to normal, however, the company hasn't reinstated its dividend -- yet.
Is the dividend gone for good, or should investors expect the entertainment company to start making regular payments again? And if so, how much should they expect?
The last dividend payment was in 2020
On Dec. 4, 2019, Walt Disney announced a semi-annual cash dividend of $0.88 per share, which was payable on Jan. 16, 2020. But due to COVID-19, in May 2020, the entertainment company announced it would forgo the next cash dividend payment, and it hasn't resumed its dividend payments since then.
Now with the public health emergencies related to COVID-19 looking like they may come to an end within this year, operations have largely gone back to normal. The good news for income investors is that Disney's dividend may be coming back as well.
Could the dividend be coming back in 2024?
On Disney's first-quarter earnings call, CEO Bob Iger stated that management intends to ask the Board of Directors to reinstate the dividend before the end of the current year. If approved, then it's possible that the next dividend could come in January 2024, following a similar schedule to what Disney executed in the past.
The caveat, however, is that it likely won't be as big as the dividend that the company was paying in the past. Chief Financial Officer Christine McCarthy says that the payout "will likely be a small fraction of our pre-COVID dividend with the intention to increase it over time as our earnings power grows."
How much of a yield should investors expect?
The big challenge for Disney will be getting the right size of dividend to ensure that the company can grow the payout without hampering the business financially, particularly as it looks to strengthen its streaming business and compete with Netflix. Prior to the pandemic, Disney's payout ratio was typically around 30% or less.
DIS Payout Ratio data by YCharts
Last fiscal year, for the period ending Oct. 1, 2022, Disney reported diluted earnings per share of $1.75. If the company were to maintain that level of profitability this year, then a 30% payout would imply an annual dividend of approximately $0.53. And if Disney were to make semi-annual payments as it did in the past, that would mean recurring payments of about $0.26 -- which is a 70% reduction from the $0.88 that it was previously paying.
It's also possible that the dividend might even be lower than that. The company doesn't anticipate its Disney+ streaming service to be profitable until fiscal 2024, so it may need more of a buffer there.
If the dividend is $0.53 over the course of a year, that would put the stock's yield at around 0.53% based on its current share price of $100. Unless Disney's stock crashes significantly, it seems a safe assumption that the yield will be well below 1%. By comparison, the S&P 500 average yield is 1.7% right now.
Should you buy Walt Disney stock today?
If it's a dividend stock you're after, there are many better options out there to consider. Disney's dividend, should it return, likely won't be significant.
The stock has potential, however, as being an attractive growth investment. The company's parks, experiences, and products segment generated an impressive 21% growth rate over the last three months of 2022. Its overall sales of $23.5 billion were up just 8%, but if the company can stop the bleeding in its media and entertainment segment and generate some much-needed growth from that area of its business (which includes Disney+), it could make for a solid buy.
With a strong brand and a powerful moat, Disney is a stock that could be worth holding for the long haul -- just don't expect much of a dividend anytime soon.
