Walt Disney Co. (NYSE: DIS) has lived up to one key expectation we had stated earlier this week: it announced that it is raising its dividend payout to stockholders. What is a major surprise is by just how much the company increased its dividend above and beyond what we had modeled. Disney’s board of directors declared on Wednesday that it would pay an annual cash dividend of $1.15 per share. This is an increase of $0.29 per share, or a gain of 34% from the previous year.
What stands out here is that the dividend hike announcement for 2013 was up by 15% to $0.86 per share. When we predicted the Disney dividend hike earlier this week, our view was that Disney’s low 0.93% or so yield at the time would be raised to at least a 1% yield again — perhaps to as much as $1.00 per share, but most likely to $0.95 per share.
Needless to say, Disney taking the payout up to $1.15 is far above $1.00, and certainly better than the baseline case of $0.95 per share. We remain marginally disappointed that Disney is still the only Dow Jones Industrial Average component that pays its dividend annually rather than quarter. Still, the upside surprise of the dividend hike should more than offset that concern.
Is it possible that the buzz from the newest Star Wars trailer gives Disney that much more earnings confidence beyond 2015?
The new dividend is payable on January 8, 2015, to shareholders of record at the close of business on December 15, 2014. This is Disney’s 59th consecutive dividend payment to shareholders.
Robert A. Iger, chairman and chief executive officer, said:
Disney delivered the highest results in its history in Fiscal 2014, reflecting the extraordinary quality of our creative content and the unparalleled strength of our brands. We achieved record revenue, net income and earnings per share for the fourth year in a row, and we are delighted to be able to increase our shareholder dividend by 34 percent while continuing to invest for future growth.
Disney shares closed down 0.4% at $93.11, against a 52-week range of $68.80 to $93.81. Its current consensus analyst price target is $95.44, although that may rise as the dividend hike has to be surprising to more than just us. The highest analyst price target now is up at $106.