E Disney: A Long-Term Dividend Growth Gem

Why Disney’s Dividend Suspension Was A Short-Term Setback

There is no doubt that Disney was negatively impacted by the coronavirus pandemic over the past year, which forced the company to close down its parks and resorts for an extended period. As a result, on November 12th, 2020 Disney announced it would forgo its next semi-annual dividend payment to shareholders.

While a dividend suspension is never good news for investors, there is an important context that investors should keep in mind. As a cyclical and economically sensitive company, Disney was significant affected by the coronavirus pandemic. But once the pandemic eventually ends, Disney should bounce back just as quickly simply due to pent-up demand.

Another important consideration is that Disney has high investment demands right now, as the company rolls out its Disney+ streaming service which is a key strategic imperative. Disney’s biggest growth initiative going forward is the launch of the Disney+ streaming service, which is a stand-alone service that can also be bundled with their ESPN+ streaming service and Hulu. The dividend suspension helped free up valuable financial resources that the company needs to invest in its strategic growth initiatives, such as Disney+.

Final Thoughts

As a result, investors should keep a long-term focus when it comes to Disney. It is likely the company will return to paying its dividend later this year, as long as the global economy continues to recover from the coronavirus pandemic. And over the long-term, Disney is likely to return to being a strong dividend growth stock, as it was before the pandemic. Therefore, dividend growth investors should consider Disney to be a long-term dividend growth stock, even though the company has temporarily suspended its dividend.

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