Shares of The Walt Disney Company (NYSE:DIS) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.88 per share, investors must have owned the shares prior to 07 December 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Walt Disney’s latest financial data to analyse its dividend attributes.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Walt Disney fare?
The current trailing twelve-month payout ratio for the stock is 20%, which means that the dividend is covered by earnings. Going forward, analysts expect DIS’s payout to increase to 26% of its earnings, which leads to a dividend yield of 1.6%. However, EPS is forecasted to fall to $7.04 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. DIS has increased its DPS from $0.35 to $1.76 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Walt Disney has a yield of 1.5%, which is high for Entertainment stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Walt Disney is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for DIS’s future growth? Take a look at our free research report of analyst consensus for DIS’s outlook.
- Valuation: What is DIS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DIS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.