If you’re buying Disney these days, it’s not for the pocket change. The media giant suspended its semiannual dividend in May. It announced earlier this month that it will also be nixing its next semiannual payout.
Asking if Disney is a great dividend stock — when it’s now been nearly a year since shareholders have received a distribution check — might seem cruel. However, Disney emphasized during its earnings call two weeks ago that the payout disruption isn’t permanent.
The House of Mouse will get back to returning money to its shareholders, probably as soon as next year. It’s just like any hero in a Disney animated feature at this point: We’re going on a transformative journey here, and how things appear now aren’t how they’ll be later on.
Be prepared
“We anticipate the payment of a dividend will remain a part of our long-term capital allocation strategy following the return to a normalized operating environment,” Disney CFO Christine McCarthy said during the company’s fiscal fourth-quarter earnings call two weeks ago.
The dividend isn’t prudent right now for a couple of reasons. The biggest reason, naturally, is that there are still plenty of near-term uncertainties across a variety of Disney’s most important businesses. Disneyland in California remains closed, and the other parks have yet to turn the corner of profitability since unlocking their turnstiles this summer. Disney cruise ships aren’t setting sail until some point in 2021. Folks aren’t going to the movies, so Disney has pulled its theatrical releases for the time being.
