Disney’s (NYSE:DIS) stock has jumped in the past couple of weeks, primarily as a result of the company’s announcement regarding dividend increase. Disney announced that it will be increasing its annual cash dividend by 50%, up from 40 cents per share to 60 cents per share to be paid in early 2012.  Investors have welcomed this move, which has helped support shares in the last week. The parks & resorts business, including these cruises, is what distinguishes Disney from other media conglomerates such as Time Warner (NYSE:TWX) and News Corp (NASDAQ:NWS).
In another development, Google’s (NASDAQ:GOOG) Youtube video service will now be offering Disney’s movies. The company has stated that its movies will not be available for rental at less than $1.99.  This is to make sure that new releases do not disrupt the other electronic and physical sell-through. Youtube is just another distribution platform for Disney’s content, and with its wide reach, may help in generating additional demand and add to profits.
Disney is nearing the completion of Disney cruise ships which has been capital intensive, and as this winds down, we expect this to free up more cash flow that could be returned to shareholders.
Apart from the above two, there were some other developments for Disney in last couple of weeks. These include a top management change where ESPN’s head George Bodenheimer will step down from his duty next year and Disney beginning expansion of its Hongkong Disneyland theme park. We want to re-iterate that although Disney is often in the news due its efforts concerning theme parks and resorts, this business constitutes relatively less, about 10%, to the company’s value.
Our price estimate for Disney stands at $46, implying a premium of little under 30% to the market priceNotes:
- THE WALT DISNEY COMPANY BOARD INCREASES ANNUAL CASH DIVIDEND BY 50 PERCENT TO $0.60 PER SHARE, Disney Press Release, Nov 30 2011 [↩]
- Disney: No 99-Cent Movie Rentals on YouTube, Home Media Magazine, Nov 28 2011 [↩]