The Walt Disney Company is a diversified global family entertainment and media company. It has operations in media networks, parks and resorts, studio entertainment, and consumer products.
Starting out as a cartoon studio in the 1920s Disney has today become the global leader in the entertainment industry having operations in more than 40 countries. The company operates over 100 Disney branded television channels, which are broadcast in 34 languages in 164 countries and territories. Walt Disney also owns some of the most well recognized brands in the world. Its primary cable networks are branded ESPN, Disney, and Freeform.
Walt Disney’s business can be broadly categorized into four segments: Media Networks (cable networks, and broadcasting) accounting for 35% of revenues, Parks, Experiences and Products (38% – sale of food, beverage, merchandise and admission charges), Studio Entertainment (15%) and Direct-to-consumer & International (12%).Investment Data
- Opportunity Score: 70
- Ticker: NYSE:DIS
- Sector: Consumer Cyclical
- Industry: Entertainment
- Market Cap: 247.26B
- P/E: 17.31
- Dividend Yield: 1.28
- Dividend Payout Ratio: 22.08
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
With more than 100 years of its existence, Walt Disney has developed the skill to vertically integrate its characters into virtually all of its businesses. Walt Disney generates revenues from fees charged to cable, satellite and telecom service providers, affiliate fees ad sales; sale of admission tickets to theme parks, sales of food, beverage and merchandise, charges for resort and vacation packages; and distribution of films in the theatrical, home entertainment and SVOD markets.
A diversified set of large, global and synergistic businesses is Walt Disney’s biggest competitive strength. The company owns some of the well known brands in the world. The Media Networks is the primary unit of The Walt Disney which comprises a vast array of television networks and cable channels across two divisions – Walt Disney Television and ESPN. The ESPN brand is the most trusted brand in sports.
The company operates over 100 Disney branded television channels, which are broadcast in more than 160 countries and has 1,300+ million subscribers. Walt Disney owns a number of resorts and theme parks all around the world. The Walt Disney Studio makes movies, music, and stage play for people worldwide. The company is developing a new direct-to-consumer service, Disney+, that is scheduled to launch in the U.S. in late 2019, offering Disney, Pixar, Marvel and Lucasfilm movies.
Walt Disney has a strategic acquisition growth plan in place. The company enters into acquisition agreements from time to time, which helps it grow its film franchises. The most significant ones being those of Pixar in 2006, Marvel in 2009, and Lucasfilm in 2012. The company acquired Twentieth Century Fox (21CF) and HULU LLC recently. These acquisitions are poised to increase Disney’s impressive streaming network. Hulu is the fastest growing video service in the U.S. Walt Disney also has ambitious plans to expand its theme parks footprint and expects heavy investments over the next five years.
Walt Disney is a Dividend Starter, growing its dividend each year since 2010. It has paid dividends consistently for the last 25 years. Walt Disney last raised its dividend by 4.7% and pays them semi-annually. It has an average dividend yield of 1.3% and a low payout ratio of 22%. The company has increased its dividend at a very impressive 17% CAGR over the last decade. Its earnings have also grown at 13.6% CAGR during the same time.
Most of the income generated from media networks segment are fee income and represent consistent cash flows for the company. The company is witnessing a growth in its subscriber base for its online content on a YoY basis. Walt Disney is also poised to grow from its association with Hotstar in India, one of the largest developing nations with rising household earnings, lowest GB costs for wireless data, increasing hours spent on video content viewing, etc.
Walt Disney has a strong brand affinity and caters to adults and kids alike. Given Walt Disney’s large fanfare, its Parks and Products segment receive an increasing footfall every year. Disney’s products which are based on its famous characters are also very popular amongst consumers. It has a huge fan base of more than 1 billion people and is capable of generating huge box office earnings. The company has made 44 Disney and Pixar films since 2006 and has generated billions of dollars in box office earnings so far.
Walt Disney’s businesses are cash cows. Its leading position in media and entertainment, popular theme parks, larger than life animated movies and characters are its biggest competitive advantages. The company should also benefit from the acquisition of Fox’s assets with plans to add impressive movie and TV show franchises such as the X-Men, Avatar, and The Simpsons, etc in the near future. Walt Disney’s diversified businesses positions it well to continue its dividend growth streak in the future.
Walt Disney faces substantial competition in each of its businesses. Its media networks business competes with other broadcast and cable networks, television stations and online video services and games. The company’s theme parks and resorts compete with other entertainment, lodging, tourism options. However, Walt Disney enjoys an edge over the competition on creativity, technology and innovation front. The company plans to keep growing at a rapid pace by leveraging its brands, technological capabilities, and international presence.
Given its leading position in media and TV networks, a growing portfolio of beloved brands and fast-expanding distribution network, Walt Disney is in a good position to gain from the rising number of broadband connected homes and growing trends of video streaming. Walt Disney is one of the iconic brands of the world and has given us some of the most loved characters such as Snow White, Mickey Mouse, Cinderella, etc. The incredible popularity of Disney’s brands and franchises positions the company well for future dividend hikes, however at a slower pace.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.