Last update on 2024-06-25

Walt Disney (DIS) - Dividend Analysis (Final Score: 5/8)

Analyze Walt Disney (DIS) dividend performance using an 8-criteria scoring system. Assess yield, growth, payout ratio, sustainability, and more in this in-depth review.

Short Analysis - Dividend Score: 5

We're running Walt Disney (DIS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Walt Disney (DIS) was conducted using an 8-criteria scoring system. The company scored a total of 5 out of 8 in various aspects such as dividend yield, growth rate, payout ratio, and sustainability. Disney's current dividend yield of 0.3323% is lower than the industry average of 0.96%. Although the company has shown an average annual dividend growth rate of 6.61% over the past 20 years, there have been years of significant volatility and even absences in dividend payments. On a positive note, Disney's payout ratio has averaged around 19.96%, well below the 65% threshold, indicating prudent financial management. Sustainability issues arose during the COVID-19 pandemic years, with dividend payments ceasing from 2020-2022. The ability to cover dividends by earnings and cash flow showed inconsistencies but is showing a cautious recovery in 2023. Stability and consistency of dividend payments have been affected due to the pandemic, disrupting the previously stable history. Stock repurchases have shown a mixed trend with high activity in early years followed by a less consistent pattern post-2019.

Insights for Value Investors Seeking Stable Income

Given Disney’s overall score and analysis results, it would be advisable for dividend-focused investors to exercise caution or consider other options with more consistent and higher dividend yielding stocks. However, long-term investors who believe in Disney's potential for recovery and growth post-pandemic may find value in holding the stock. The company's commitment to returning value to shareholders is evident, but the recent disruptions and low yields might not make it the best option for those seeking stable and high dividend income. Monitoring future financial performance and management strategies would be essential for making a well-informed decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is calculated as the annual dividend payment divided by the stock price. It represents the return on investment for shareholders from dividends alone. A higher yield can be attractive for income-focused investors, although it's important to consider if the yield is sustainable.

Walt Disney's current dividend yield of 0.3323% is substantially lower than the industry average of 0.96%. Historically, Disney's yield has fluctuated but remained relatively stable, usually above 1% from 2003 to 2019. However, Disney's dividend yield dropped to 0% from 2020 to 2022, likely due to the economic impact of the COVID-19 pandemic, which led to the suspension of dividend payments. The return to dividend payments in 2023 signifies a move towards normalization, but the current yield is still low. Given Disney's stock price closing at $90.29 in 2023, this low yield might suggest the company is prioritizing investment in growth or recovering from financial setbacks rather than immediate income for investors. This trend may be seen as unfavorable for dividend-seeking investors but more acceptable for those focused on long-term capital appreciation.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion measures the annual growth rate of dividends per share over a specified period, ensuring that a company is consistently returning value to shareholders. A growth rate higher than 5% indicates strong financial health and sustainable earnings growth.

Analyzing Walt Disney's dividend per share ratio over the last 20 years, the company has experienced significant volatility. Years such as 2009, 2019, and 2020 saw a complete absence or significant negative dividends indicated by -100 in 2020. Notably, the company's average dividend ratio over the period is 6.61%, marginally higher than the 5% threshold. This suggests a slightly positive trend, but the inconsistency and eventual cessation of dividends in recent years due to pandemic-related impacts or strategic reinvestments raise concerns about the sustainability of growth. Therefore, the dividend growth rate for Walt Disney has been less than optimal due to periodic eliminations and volatility, making it a cautious territory for dividend-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

Criterion 1.2 (Average Payout Ratio lower than 65% in the last 20 years) assesses a company's ability to sustainably cover its dividend payments with its net income. A lower payout ratio indicates that a company is retaining more of its earnings, which can be reinvested into the business or used as a buffer for economic downturns. A higher ratio, on the other hand, might signal potential difficulties in maintaining dividend levels if earnings decline.

Based on the provided numbers, Disney's payout ratio over the last 20 years has averaged around 19.96%, significantly lower than the 65% threshold. This low average payout ratio is a positive signal. Historically, Disney has managed to maintain its dividends while retaining a substantial portion of its net income for reinvestment or other uses. Even during economic challenges, such as the recent pandemic years where Disney's payout ratio dropped to 0%, the company appears to have strategically opted to preserve capital. This underscores Disney's strong financial management and prudent dividend policy, which should reassure long-term investors.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The Earnings Per Share (EPS) of Walt Disney (DIS) have shown considerable fluctuations over the years. The EPS surged to 8.3597 in 2018 from a low of -1.5841 in 2020, reflecting the financial impacts of COVID-19. On the other hand, Dividends Per Share (DPS) were erased for three consecutive years from 2020 to 2022 due to financial uncertainties, showing a reinstatement in 2023 at 0.3. Examining the ratio of DPS to EPS, this metric shows a generally healthy trend before 2020, with values typically ranging between 0.15 and 0.28. The negative and zero values in recent years highlight the difficulty in maintaining dividends amidst negative earnings or losses. Therefore, while the pre-2020 figures reflect a well-supported dividend by earnings, the zero dividends during COVID distinctly display a break in this support. As of 2023, the reinstated dividend shows a cautious recovery but indicates that the dividend may not be as robustly backed by earnings given the lower EPS of 1.2877 in 2023.

Dividends Well Covered by Cash Flow?

Explain the criterion for Walt Disney (DIS) and why it is important to consider.

Dividends well covered by cash flow analyses how comfortably a company can pay dividends with the free cash flow it generates every year. Being able to cover dividends from cash flow suggests financial strength and sustainability. Disney has experienced fluctuating free cash flows over the years, reaching as high as $9.83 billion in 2018 and dropping significantly at other times, notably in 2020 and 2021 due to the pandemic, which explains its inability to distribute dividends during those years. Evaluating whether dividends are well covered by cash flow helps investors gauge how reliable the dividend payments are likely to be.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Walt Disney (DIS) and why it is important to consider

Stability in dividend payments, especially where the dividend per share did not drop by more than 20% over the past two decades, is crucial because it provides income-seeking investors with a predictable and reliable income stream. This stability instills confidence in investors, indicating the company's robust financial health and consistent cash flow.

Dividends Paid for Over 25 Years?

Examine whether Walt Disney (DIS) has consistently paid dividends for over 25 years and analyze the significance of this criterion.

The dataset shows Walt Disney (DIS) has been paying dividends relatively consistently from 1998 through 2019. However, there is a noticeable interruption in dividend payments starting from 2020 to 2022, evidently resuming in 2023. To be eligible for the 'Dividends Paid for Over 25 Years' criterion, a company must not only pay dividends but do so without interruption for a substantial period. While Disney fell short due to zero dividends paid during the three-year hiatus (2020-2022), its long history of prior payments highlights its commitment to returning value to shareholders. This interruption, largely attributable to the financial impacts of COVID-19 on the macro environment and Disney's revenue streams, is a negative trend for investors specifically seeking unwavering dividend consistency. Although they resumed payments in 2023, cautious investors may view this recent inconsistency as a risk factor. Numbers such as consistent increases seen from 2011 ($0.60) to 2019 ($1.76) bolster Disney’s historical credibility, but the failure to maintain dividends during the pandemic crisis is an important red flag.

Reliable Stock Repurchases Over the Past 20 Years?

Assessing reliable stock repurchases over the past 20 years for a company like Walt Disney (DIS) helps investors understand management's commitment to returning value to shareholders. Regular repurchases can indicate strong financial health and effective capital management.

Over the two decades, Walt Disney (DIS) has shown a somewhat inconsistent pattern of stock repurchases. The number of shares outstanding decreased significantly during the years identified as reliable repurchase periods, especially notable in years like 2013-2018, when shares outstanding decreased from 1813 million to 1507 million. This indicates robust repurchasing activity in those years. Contrary to that, from 2019 onward, the repurchase pattern became less consistent as the number of outstanding shares increased, reaching 1828 million in 2023. The average repurchasing rate of -0.5262 suggests that overall, Disney has effectively reduced its share count over the long term, reflecting a positive trend in stock repurchase practices. However, the increasing share counts in recent years might be a cause for concern, potentially reflecting changes in financial strategy or capital needs.