Walt Disney is one of the largest and diversified international companies specializing in entertainment, media, parks, resorts and various consumer products. The company also operates highly popular amusement parks around the world, and also produces movies, cartoons and shows for kids and adults alike. With its highly recognized brand and a very profitable sports channel, Walt Disney was able to grow its net income and operating cash flows from 2010 to 2015 by a substantial amount. With such a successful financial performance, the company has consistently paid, and increased, dividends year after year, making Walt Disney an attractive option for income-seeking investors.

Looking towards its dividends per share for instance, one may note that Disney raised its dividends per share from just over 23 cents in 2004 to $1.15 in 2014, which represents an average annual growth rate of 17%. The company paid dividends once a year before 2015; however, in June 2015, Disney declared a cash dividend of 66 cents per share for the first six months of the fiscal year 2015, and announced the company will pay dividends on a semi-annual basis. The 66-cent dividend per share therefore represents a 15% increase on an annualized basis when compared to 2014.

While Disney does not state how it determines its dividends, the payouts are most likely contingent on the company's performance; with the probability of focusing on its ability to generate sufficient operating cash flows to cover its investment and financing requirements. As of June 2015, the company has a short- and long-term outstanding debt of $15.3 billion that is mostly due beyond 2020, thus giving it ample room for financial maneuvering with its cash on hand balance of $4.5 billion.

Disney's dividend yield is dependent on the dividend policy established by the company's board of directors and on stock price changes. From 2004 to 2014, Disney's dividend yield ranged from 0.37% in January 2005 to 1.04% in February 2009. Its average dividend yield from 2004 to 2014 was approximately 0.5%. In July 2015, the company's dividend yield jumped to 0.75% as a result of the 15% increase in the annual dividends per share. Also, since quarterly results as of June 27, 2015, did not meet analysts' expectations, there is growing concern over the company's stock price, as it decreased by about 20%.

As a result of its stock price decline, Disney's dividend yield went up further to 0.9%. At the end of September 2015, Disney's dividend yield currently stands at 1.3%.

Disney's low dividend yield is most likely due to its stock appreciation and the company's emphasis on stock buybacks rather than its dividends. From 2010 to 2015, the company bought back its own common shares worth $21.3 billion and is continuing its buyback program as of September 2015. The company's spending on the share buyback program by far exceeds cash dividends. Some companies, such as Disney, prefer generating shareholders' returns through share buybacks rather than paying cash dividends since buybacks typically defer taxes for investors.

Looking at Disney’s television and movie business lines together with its extensive franchising operations, one may note how the company has enabled an increase in its operating cash flows from $6.6 billion in 2010 to $10.7 billion for the trailing 12-month period ending on June 27, 2015. At the end of the day, the company is left with a sufficient liquidity cushion.

Despite recent challenges Disney remains in a financially solid position that enables the company to continue its dividend and share buyback program.

Today, Disney enjoys a highly favorable position within media networks, additionally it also runs one of the most trusted channels among parents who subscribe to media content for their kids.

Disney is also generating an increasing amount of revenue from its characters by issuing franchising rights with Pixar, Lucasfilm Ltd., LLC. and Marvel, thereby expanding its portfolio of characters and appeal to a much broader audience.

Article by Steve Diacono