Good article. I agree with Eric Volkman…be nice to know more about the dividend.
I admit, though, I am of two minds about it…either bring it back or perhaps keep it off for a few years and focus on + as well as debt reduction. Current debt load is about $48 billion, and I wouldn’t mind seeing that go down. Interest expense during the last quarter was, at least to me, significant at $311 million.
My top issue, though, with the dividend, is this: do it on a quarterly schedule! I am not a fan of annual/semi-annual payouts. If it isn’t quarterly, I would then argue the company should keep the cash and/or buy back shares/debt. Just have Disney concentrate on growth. Then, it could maybe send out some special dividends once in a while.
As a firm believer in the Disney DRIP program it was one of the reasons that made, for me, Disney’s stock a more attractive buy. At one point I managed to hold more than 600 shares of the company by using the DRIP in conjunction with monthy buying to dollar cost average my purchases.
I have since sold of most of the shares to have a more balanced portfolio but if they restart the dividend I may get back into the DRIP program.
I admit, though, I am of two minds about it…either bring it back or perhaps keep it off for a few years and focus on + as well as debt reduction. Current debt load is about $48 billion, and I wouldn’t mind seeing that go down. Interest expense during the last quarter was, at least to me, significant at $311 million.
If there’s opportunity to invest in a growing business area, that should be the company’s first priority. I’m willing to take a smaller payout in exchange for growth.
However, I would prefer the payout to shareholders to be in the form of a share buyback rather than a dividend because it’s much friendlier from a tax perspective. A share buyback reduces the number of outstanding shares so each outstanding share represents a larger interest in the company, increasing the value of the shares that remain outstanding (typically leading to a split to maintain the price of the shares in a reasonable band when the price reaches some threshold). Shareholders seeking income can sell a few shares, realizing the income as long term capital gains rather than as dividends. I believe that the provision of the “Bush” tax cuts that reduced the tax on “qualified” dividends to the same rate as long term capital gains expired, so the tax rate on dividends is again the same as on ordinary income.
My top issue, though, with the dividend, is this: do it on a quarterly schedule! I am not a fan of annual/semi-annual payouts.
I’m not persuaded that the frequency of a dividend matters. When the company pays a dividend, the value of the shares should drop by the amount of the dividend on the “ex dividend” date (meaning that the next day’s “open” price is lower than the “close” on the “ex dividend” date) because the value of the traded share is that much less. The only implication of the frequency of payout is the need to budget appropriately by those who buy dividend stocks for income.
Your success does show the power of averaging and reinvested dividends. Does that program still exist (or I should ask, was it still in existence before the suspension)? Is there an advantage to doing that today considering the no commission/free dividend reinvestment environment?
Norm, I think you make a lot of sense with the share buyback. Considering DIS really was never known as an income stock, something the article pointed out, buybacks might be better, especially when also considering that the company tends to use its currency for acquisitions.
In terms of payout frequency, I do favor frequent payments because if one is in it for the income, then it benefits the shareowner in terms of cash-flow management (a REIT that pays monthly such as O is great). But even if one isn’t using DIS for income, I think more payouts could offer more opportunities to dollar-cost average…I would be interested in seeing a study on that. Like you say, it might not matter, but I’ve always been curious on that topic…
In terms of payout frequency, I do favor frequent payments because if one is in it for the income, then it benefits the shareowner in terms of cash-flow management (a REIT that pays monthly such as O is great). But even if one isn’t using DIS for income, I think more payouts could offer more opportunities to dollar-cost average…I would be interested in seeing a study on that. Like you say, it might not matter, but I’ve always been curious on that topic…
If you are reinvesting your dividends and you want to dollar cost average, the frequency of payout only matters if you are using a Dividend Re-Investment Plan (DRIP) to do the reinvestment. My instinct is to shun the DRIP and get the dividends in cash instead so that I can reinvest the cash in the positions that have become underweighted, as this reduces the need to sell shares to rebalance. This approach combines reinvestment of dividends with rebalancing. Note that every sale has a fee to reregister the shares to the new owner, so there’s a cost to selling, albeit small, even in modern brokerage accounts with unlimited commission-free on-line trades.
Using the DRIP kept my purchase price low because you could do directly through Disney for the buy transaction. Same thing with the sell order by doing it through Disney there was no sales charge and I had them do an electronic transfer into a cash account.
Using the DRIP kept my purchase price low because you could do directly through Disney for the buy transaction. Same thing with the sell order by doing it through Disney there was no sales charge and I had them do an electronic transfer into a cash account.
With major brokers like Charles Schwab now offering trades with zero commissions, that advantage seems to be gone.