My most recent post featured a list of companies that caught my attention lately. After some hesitation and discussion with my wife, I decided to go with the company which had the lowest dividend yield out of 4 companies in the watchlist – The Walt Disney Company (DIS).
Shortly about the company from Morningstar:
The Walt Disney Co owns the rights to some of the most globally recognized characters, from Mickey Mouse to Luke Skywalker. These characters and others are featured in several Disney theme parks around the world. Disney makes live-action and animated films under studios such as Pixar, Marvel, and Lucasfilm and also operates media networks including ESPN and several TV production studios. Disney recently reorganized into four segments with one new segment: direct-to-consumer and international. The new segment includes the two announced OTT offerings, ESPN+ and the Disney SVOD service. The plan also combines two segments, parks and resorts and consumer products, into one. The media networks group contains the U.S. cable channels and ABC. The studio segment holds the movie production assets.
Sector: Communication Services
Disney has a wide range of services in its portfolio. It brings some diversification to my portfolio, as I didn’t have any companies from the Entertainment industry yet.
As I mentioned in my previously posted watchlist, Disney had a nice run during last year, especially since April, when it announced its new video streaming service – Disney+. Since launching in November 2019, the streaming service already attracted ~25 million subscribers. According to Hollywood Reporter, it’s expected to hit 100 million by 2025. The fact that Disney+ app was downloaded 41 million times already says a thing. I think the service is especially attractive to families with kids, as it has so much family-friendly content.
On the 29th of January, I bought 8 shares of DIS for $136.55/share for a total of $1099 (including commissions).
This purchase adds $11.97 to my forward annual dividend income.
Fundamentals at the purchase price (as they stood on the 29th January):
- P/E ratio (TTM) – 21.89;
- Forward P/E (1 Yr.) – 26.18;
- Dividend Yield – 1.29%;
- Payout ratio – 25%;
- 10-year dividend growth streak;
- Net Debt/EBITDA – 2.58;
- Market Cap – $246.85B.
The dividend yield is very small, compared to my other holdings. However, I think it’s good to have some companies with lower initial yield but bigger growth potential. I am a dividend growth investor, not just dividend investor in the end 🙂
What do you think of Disney? Do you have it in your portfolio? Did it treat you well if you had it for a while? I would love to hear your thoughts!
17 thoughts on “Recent Buy – Walt Disney (DIS)”
High P/E, low dividend yield. 2,5x debt/ebitda not the lowest leverage. Personaly I would not go for Disney, nice company tough 🙂 maybe will turn out a good investment and dividens generator in L/T perspective 🙂
Thanks for the comment P2035. We’ll see how it goes in the future. Dividend yield is definitely very small at the moment but I hope they have a lot of room to grow 🙂
This is why i would prefer P/E ratio in % as a profitability ratio. This way you better see how much dividend yield you could get at max payout. DIS can you get 3,8% from forward P/E (26). Well thats not magic as well. Betting on a major growth for the future. Mmm i would go for T better with PE of 17x = 5,9% profitability and div yield of 5,4%. They are a direct competitor to DIS. Betting of DIS outperforming T in L/T perspective, I would not, I would bet on T as it is way heavier company. Its like betting on IT telephone start-up outperforming Telia. In the end Telia can burn some cash and kill the competitor. Same with T vs DIS. Their EBITDA is 60 vs 20 and I dont see any major increase in DIS. Their generated NetIncome is flat over past 2y. But im not a good investors. Just bought oil companies and MO and in 1mo they are all -10% 😀 so im a crappy advisor 😀
Well, you never know what will happen in the future. I have some T in my portfolio as well but I don’t think that they are direct competitors in all the sectors they operate in.
I like to think that it’s still better to invest money to dividend paying stocks than to spend it on items that lose value to 0, like too many clothes or an expensive bottle of cognac 🙂
Well hard to argue about that 😀 Same mindset here 🙂
I own Disney myself and bought at circa $100, only 2 shares unfortunately. Although I really love the company at this time it’s a tad bit expensive for me. I recently opened a position in Aflac to add to my exposure in Financials.
Thanks for the comment Mr. Robot! Happy to be a fellow shareholder of DIS. I agree that it’s quite expensive but it’s hard to get this company for cheap. If the price goes down and the valuations increase, I will probably just add more to the company 🙂
Nice addition to Aflac. I heard about them but haven’t investigated much.
Disney is a great company… but not a great value buy at current levels. In the words of Warren Buffett, whether it’s stocks or socks, I like buying quality merchandise when it’s marked down. I have no doubt Disney will continue to do well but I don’t have as much faith in share price returns.
Thanks for the comment Brian!
That’s a nice way to put it. I agree that it’s not cheap but I just wanted to own part of the company. Perhaps this purchase was more from the emotional side but we’ll see how it turns out in the long term 🙂
BI, let me start by saying congrats on this purchase! DIS is a hell of a company and the future looks bright for it. Since I don’t have tons of money to invest, I don’t want to pretend I’m Warren Buffett Jr. Current P/Es, historical valuations aren’t of that high importance for me, as I invest in small amounts and build my positions slowly over time. Thus there is no way that valuations will keep me out of owning high-quality companies. The true value of a business is in the future, not in the past. The recent numbers of DIS underpin the hypothesis that DIS is a high-quality company with a great future. Disney+ has had an incredible start with over 28 Million subs. Revenue for the quarter increased 36% year over year to $20.6 billion. There is some great potential for international expansion as next step. What I see is that DIS is a quality business and that its price will be much higher 5,10,15 years from now.
Thanks a lot for the comment and encouragement SF!
I like your approach. The main thing is to keep investing to great companies that will most probably be even stronger in the future.
The valuations are very subjective. Even though you may know what the ‘right’ valuation of a company share price could be, the market may think differently.
DIS is a nice addition to your portfolio, BI. I’ve been looking for a way to own some shares, but haven’t found the right entry point.
I can’t say I’ve looked into their current valuation, but if they continue to perform like they have, a few dollars per share won’t be very significant in the future.
Too bad DIS doesn’t offer parks or merchandise discounts for being a shareholder. That would be nice, right?
Thanks for the comment ED! I think it’s one of the companies that are quite hard to be found undervalued, so I just added some shares to my portfolio without waiting for a bigger pullback.
Haha, it would be nice to get some discounts to their products as a shareholder. For now, we’ll need to build the dividend income to cover at least part of it 🙂
Stipriai permokėjai už DIS. Labai keistas spendimas. Yra juk nuvertintu variantų dabar pvz MMM, MO, WFC… O jeigu jau pirkti brangiai, tai kodėl ne pvz Microsoft kur žymiai didesnės perspektyvos… Na, bet sėkmės su Disney 🙂
Pažiūrėsim ateity, ar buvo permokėta, ar ne. Portfelyje jau turiu kažkiek MMM ir MO, kurių planuoju ir pasipildyti, jei kaina laikysis dabartiniame lygyje ir turėsiu lėšų investuoti. Kaip ir rašiau, Disney duos daugiau diversifikacijos. Nenoriu vaikytis vien dividend yieldo.
O MSFT irgi visai norėčiau kažkada įsigyti 🙂
Not the cheapest today BI. However, DIS is one of those companies that will never be cheap. I love how the company has evolved and the content library they have built. They are well positioned to capitalized on the shift in consumer habits. The price would need to fall before I buy, especially at that yield. But I can understand why you wanted to add and build your position in this great company.
Thanks for the comment Bert!
You are right, it’s not cheap. But I wanted to initiate a position. I would love to add to it in the future, so there is no problem if the price drops 🙂