Walt Disney Co (NYSE:DIS) a High-Quality Company Committed to Increasing Its Dividend

August 4, 2016

President and CIO Jim Wright of Harvest Financial Partners says Walt Disney Co (NYSE:DIS) is an example of how it pays to be a patient and opportunistic investor, as this is a company with strong franchises that is committed to paying and increasing its dividend.

This is a company that we have known well for a long time, and obviously, a lot of people know Disney. But it’s a type of company we wanted to own. It has strong franchises.

For example, they just expanded their theme-park business into China, and now have theme parks throughout the world. They own ESPN, which is the most valuable cable brand out there. They also own ABC. And of course, the movie studios led by the Disney brand. They also have Pixar and Marvel. So it’s a company that is just full of wonderful brands and great franchises, and it’s run by Bob Iger. He has been a terrific CEO, and we like the management that Disney has.

This is a company that we have identified and watched for a while. At some point last year, the stock was at $110 or $120, and it just didn’t represent really good value to us selling at a fairly large premium to the market. But we’ve done our work, and we were ready. Then, fortunately for us, in February, they disappointed some investors when they released earnings and showed a modest decline in ESPN subscribers. So after the earnings announcement, the stock dropped into the mid to high $80s, and we jumped in and initiated a position. Right now, the stock is selling in the mid to low $90s. We would be excited to buy more in the $80s, but it’s not overly expensive here.

We have a company that is selling probably about 15 times forward earnings. So we get all of those terrific businesses at less than a market multiple. Disney also provides a 1.5% dividend yield, and it is a dividend that the company has been raising regularly. So Disney exemplifies the characteristics we have mentioned: a high-quality company committed to paying and increasing its dividend. Because we were patient and waited, we finally got our chance to purchase it. We certainly think it has 20% to 30% upside from these prices.