Cash distributions are back at Walt Disney (DIS 0.97%). The media giant announced the return of its payouts on Thursday afternoon, declaring a semi-annual dividend of $0.30 a share for the second half of its fiscal year that ended in September. The distribution will be paid on Jan. 10 of next year to shareholders of record as of Dec. 11.
The return of the dividend isn't really news. Disney announced back in February that it wanted to resume its cash distributions before the end of this calendar year. It reiterated that desire in two of its subsequent earnings calls.
Disney now paying $0.30 a share every six months doesn't amount to much for a stock that's approaching $100. It translates to a yield just above 0.6%, a pittance in this era of high interest rates available on short-term fixed-income vehicles. This is still an important event that is bigger than just the small payout.
NYSE: DIS
Key Data Points
It's been four years since Disney shareholders received some cheese from the House of Mouse. Disney's last semi-annual dividend was declared in late 2019. The COVID-19 crisis changed things, interrupting many of its businesses. At the most basic level, the return of the payouts is a sign of things getting back to normal for the bellwether media stock.
Disney has changed a lot in the last four fiscal years. Revenue is a lot higher, and not just because of the $71.3 billion acquisition of key 21st Century Fox assets that it acquired midway through fiscal 2019. Disney+ was launched just weeks before the final dividend was declared, and its direct-to-consumer streaming business now accounts for roughly a quarter of its total revenue.
Disney's theme parks business is also generating more revenue and operating profit than it was before the early 2020 shutdowns. Disney's linear networks and movies have gone the other way, but top-line results overall are 28% higher now than they were in fiscal 2019.
Image source: Disney.
The other side of the coin is that Disney's stock price and earnings are considerably lower now than they were four years ago. Losses at Disney+, Hulu, and ESPN+ have been massive, and investor sentiment has soured for Disney now that it's not running on all cylinders. The dividend could help restore the sentiment narrative. If Disney is comfortable returning money to its shareholders at a time when it's trying to score $7.5 billion in annual cost savings, it must be on track to turn its expanding streaming business profitable by the end of the new fiscal year.
The small dividend isn't just a wink that things are getting back to normal for the entertainment behemoth. The return of regular distributions opens the stock up to money managers at mutual funds and other institutional investment vehicles that have income-generating requirements. There's probably some risk-averse individual investors out there who build out their portfolios the same way. Seemingly overnight, Disney now gets to join the ranks of the top blue chip dividend stocks.
The small yield itself is immaterial. Disney was never a high-yielding investment, even with its previous semi-annual dividend of $0.88 a share that is almost three times higher than the reinitiated rate. It's a return to times when Disney stock was higher and more of a core holding in household portfolios. There's also plenty of room for the distributions to grow substantially from here if Disney's recovery remains on track. This isn't just a dividend. It's a billboard. It's a springboard.
