Walt Disney, the renowned media and entertainment company, experienced a significant surge in its stock price, soaring 11% following the release of its strong earnings report and a remarkable 50% increase in its dividend. This positive news has garnered praise from analysts and investors alike, who are applauding Disney’s impressive earnings growth, optimistic guidance, and the highly anticipated launch of ESPN’s flagship streaming service in fall 2025.
While there are numerous exciting announcements in Disney’s earnings report, one that may be overshadowed is the substantial increase in its dividend. This move not only reflects Disney’s confidence in its ongoing transformation but also positions the company as an “earnings compounder,” according to management.
Delving into the details of Disney’s dividend announcement, the company declared a semi-annual dividend of $0.45, payable on July 25. This amount represents a staggering 50% increase compared to the previous payment made earlier this year. The decision to raise the dividend is an attempt to regain the trust of dividend investors after the suspension of dividend payments in 2020 due to the adverse impact of the COVID-19 pandemic on theme park sales and the costly launches of new streaming services.
Disney’s reinstatement of its semi-annual dividend in 2023 marked a turning point for the company. The current increase puts Disney’s total annualized payments at $0.90, assuming no further adjustments are made before the next semi-annual dividend declaration. With the current share price, Disney stock offers a dividend yield of approximately 0.8%.
The decision to increase the dividend is supported by Disney’s improving financials. In the first quarter of fiscal 2024, Disney reported adjusted earnings per share of $1.22, up from $0.99 in the same period last year. Furthermore, management anticipates a full-year fiscal 2024 earnings per share growth of at least 20% compared to 2023, reaching approximately $4.60.
Disney CEO Bob Iger declared this as a “new era” for the company during the earnings call with analysts. The new Chief Financial Officer, Hugh Johnston, further elaborated on this transformation, stating that Disney is now on a path to become a robust cash generator and earnings compounder starting in fiscal 2024.
With the expectation of continued growth in earnings and free cash flow, Iger believes there is a significant opportunity for Disney to enhance its shareholder returns over time. The 50% increase in the semi-annual dividend demonstrates Disney’s commitment to this goal. Moreover, Disney’s management did not stop at the dividend increase; they also authorized $3 billion for share repurchases during fiscal 2024. This share repurchase program, amounting to approximately 1.5% of Disney’s current market capitalization, highlights management’s confidence in the company’s improving financials and long-term stock performance potential.
In light of these developments, investors may be wondering if it is the right time to invest in Walt Disney. However, it is important to note that The Motley Fool Stock Advisor analyst team did not include Disney among their top 10 stock picks for investors. Instead, they identified other stocks that they believe have the potential to generate significant returns in the coming years. The Stock Advisor service offers investors a comprehensive blueprint for success, providing guidance on portfolio building, regular analyst updates, and two new stock picks each month. Since 2002, the Stock Advisor service has outperformed the S&P 500 by more than triple the return.
In conclusion, Walt Disney’s recent surge in stock price can be attributed to its strong earnings report, optimistic guidance, and the highly anticipated launch of ESPN’s flagship streaming service. However, one of the most noteworthy announcements is the remarkable 50% increase in its dividend, which signifies Disney’s confidence in its ongoing transformation. With improving financials and a focus on enhancing shareholder returns, Disney is positioning itself as an earnings compounder. While Disney’s stock may not have made it onto The Motley Fool’s top 10 stock picks, investors should carefully consider their options and seek expert advice before making any investment decisions.