Today, I’m going to discuss a topic important to all investors in The Walt Disney Company.
When will they bring back their dividend?
My name is Zach and you should leave a like and subscribe to the channel if you enjoy
the video.
Over the last year, I purchased large amounts of Disney stock as they recovered from the
most substantial crisis in company history. The pandemic-induced economic shutdowns caused
the company to close its parks and lose out on blockbuster movie theater premieres. Significant
portions of their business, previously thought to be protected by a wide economic moat were
completely knocked out. In May 2020, they suspended their semi-annual cash dividend
with no word when it would be returning. So where do we stand now?
In the companies, 2021 Q3 Earnings call they provided an update on the situation. Christine
McCarthy, the CFO of the Walt Disney Company, said:
“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. However, for the time being, we don’t anticipate
declaring a dividend or repurchasing shares until we return to a more normalized operating
environment and our leverage is back to levels more consistent with a Single-A credit rating.”
This is the most detailed news we have about the situation from Disney. Dividends and share
repurchases are a part of their long-term capital allocation strategy. This makes sense,
as historically they’ve had a consistently growing dividend and bought back shares. They
will not continue this practice until they return to a more normalized operating environment.
So when will this be? Although they didn’t actually provide any
dates we should be able to get a general idea by looking at their recent earnings and business
direction. Prior to 2020, the company was averaging between $5-7 in non-gaap earnings
per share. Throughout fiscal 2021, the company is slowly climbing back. All Disney Parks
are now open worldwide. Demand is very high, especially in the United States. It will likely
take high levels of international travel for parks to return to 2019 levels. In Q3 2021,
the Disney parks & products division was profitable for the first time, since the pandemic. The
cruise ships are starting to sail again. Movie theater premieres are returning but seeing
lowered box office numbers. Luckily, Disney+ premier access is helping offset that decline.
It’s going to be a gradual process, but these businesses are on their way to returning
to normality. For the full year 2021, analysts are projecting
Disney to have a EPS of $2.48. They’re really on pace for at least $2.71 if Q4 matches Q3,
which I think is likely. Moving into 2022, analysts are projecting a full-year EPS of
$4.98. For the full year 2023, they’re projecting $6.28. You usually want to be careful trusting
analysts, but I think they’re roughly accurate here. Disney has been crushing all of their
estimates for the past few quarters and I expect they will continue to. This financial
recovery all rests on the performance of the parks and whether or not they are able to
globally ramp-up to full capacity without major setbacks. If Disney hits an EPS of around
$5 in fiscal 2022 then I expect they will announce the return of their dividend and
share buybacks. If not then, very soon after. My guess is after the first full year of normal
earnings.
This video has been focusing on the short-term economic struggles at Disney, but remember
I am quite bullish on the company overall. Their iconic brands and parks are of extreme
quality and the move into streaming will be a huge growth driver. It’s a company with
global reach and pricing power. They will be reliably generating serious amounts of
cash for decades to come. I’m not remotely worried and they should do whatever is financially
best for the company long term. I plan on the Walt Disney Company being a core holding
in my long-term dividend stock portfolio.
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