In an attempt to enhance shareholder value, The Walt Disney Company (DIS) raised its annual dividend by 15% (or 11 cents) to 86 cents from 75 cents a share.
The increased dividend will be paid on Jan 16, 2014 to shareholders of record as of Dec 16, 2013. This marks Disney’s 58th consecutive dividend payment to its stockholders.
The enhancement in the dividend is attributable to Disney’s strong performance during the year, with its stock price jumping nearly 36.9% year to date. For the third consecutive year, the company reported record sales, earnings per share and net income.
However, the news did not provide much impetus to the stock, as the share price of the company rose 0.10% to close at $69.97 on Wednesday. The dividend yield based on the new payout and the last closing market price is 1.2%.
Disney, an S&P 500 company, last hiked its dividend to 75 cents from 60 cents on Nov 28, 2012, reflecting an increase of approximately 25%. The company’s commitment toward increasing shareholders’ return reflects its free cash flow generating capability, sound liquidity position and defined future prospects
Dividend hike is quiet frequent among companies with a stable cash position and healthy cash flow. Apart from Disney, many other firms have raised their dividends in the recent past. These include Nike, Inc. (NKE) and Sysco Corporation (SYY) that raised their quarterly dividends by 14% to 24 cents and 3.6% to 29 cents, respectively, whereas American Equity Investment Life Holding Company (AEL) hiked its annual dividend by 20% to 18 cents a share.
Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies bolster investors’ confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, Disney remains confident of its growth potential, suggesting enhanced value for shareholders.
This leading versatile global entertainment and media business currently holds a Zacks Rank #3 (Hold).