The Walt Disney Company (DIS) Dividend Stock Analysis

The Walt Disney Company (NYSE:DIS) operates as an entertainment company worldwide. The company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products, and Interactive. The company is not a typical dividend growth stock, although it has paid dividends since 1957, and has never cut them. Disney is a dividend angel which often raises dividends several years in a row, after which it keeps them unchanged. This is followed by another round of dividend raises again.

The most recent dividend increase was in December 2015, when the Board of Directors approved a 7.60% increase in the semi-annual dividend to 71 cents/share. The largest competitors for Disney include Time Warner (NYSE:TWX), Viacom (NYSE:VIA) and Twenty-First Century Fox (NASDAQ:FOXA).

Over the past decade the stock has delivered an annualized total return of 13.20% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders.

Six Dividend Stocks Sending More Cash to Shareholders

Each week I review the list of dividend increases. This is helpful in monitoring existing dividend holdings, and monitoring the breadth of dividend increases across the universe of prominent dividend growth stocks. Dividend increases also provide a proxy for near term expectations for the performance of the underlying businesses. If management continues raising dividends at the same rate as before, without achieving that through increases in the payout ratio, this indicates that they are expecting continued success in the business. If management raises dividends slower than expected, this might be an indication that things are slowing down.

Regular readers know that dividend increases are just one of the things I look for in evaluating companies. I am looking for a company with a strong track record of annual dividend growth, which is supported by growth in earnings per share. If such a company is available at an attractive valuation, it should be analyzed in detail, before being considered for my dividend growth portfolio.

Over the past week, there were six companies that met my minimum requirement for annual dividend increases. The companies include:

Six Dividend Stocks Rewarding Shareholders with a Raise

Each week, I go through the list of dividend increases in order to monitor performance of existing holdings, and uncover hidden dividend gems. I then narrow down the list by eliminating companies with a dividend growth streak that is less than a decade. I also look at things like trends in earnings per share, dividends per share, dividend payout ratios, in order to determine the likelihood of future dividend growth and growth in intrinsic value. My basic analysis also focuses on valuation and dividend sustainability.

Over the past week, there were six dividend stocks with a long streak of consecutive annual dividend increases, which raised dividends to shareholders. The companies include:

Brown-Forman Corporation (BF.B) manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages worldwide. It provides spirits, wines, ready-to-drink cocktails, whiskey, vodka, tequilas, champagnes, brandy, and liqueur. Last week, the company raised its quarterly dividend by 7.40% to 18.25 cents/share. This marked the 33th consecutive annual dividend increase for this dividend champion. Over the past decade, Brown-Forman has managed to raise its dividends at a rate of 9.40%/year. Currently, the stock is overvalued at 26.10 times forward earnings and yields 1.60%. Brown-Forman would look more appealing on dips below $36/share. Check my analysis of Brown-Forman for more information about the company.

3 Low Volatility Dividend Stocks To Make Staying The Course Easier

This is a guest post written by Ben Reynolds at Sure Dividend.  Sure Dividend helps individual investors build high quality dividend growth portfolios from Dividend Aristocrats and other dividend stocks with long histories.

The article Dividend Growth Investors: Stay The Course thoughtfully examines the difficulties of investing in dividend growth stocks when stock prices are falling.  

The article discusses how important it is to stay the course and continue building your dividend growth portfolio – even when prices are falling.  See below for an excerpt:

“There is a reason why stocks have done much better than bonds in the long-run – they are riskier. With stocks, there is always the chance that there will be violent fluctuations in the price. You can have steep downturns, which can have many weak hands scrambling for the exits. When stock prices go down, many investors assume that something is wrong, they panic and sell. They forget that your upside potential in terms of dividends and capital gains is virtually unlimited.”

The volatility of dividend stocks is what makes staying the course more difficult.  The larger the price fluctuations, the harder it is to hold onto a stock.

Starbucks (SBUX) Dividend Stock Analysis

Starbucks Corporation (NASDAQ:SBUX) operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company initiated its dividend in 2010 and has been growing distributions rapidly since then. While the company has only managed to increase dividends for four years in a row, I believe that it has the potential to reach dividend achiever status, and has the growth story to become as successful for its dividend growth investors.

The most recent dividend increase was in November 2016, when the Board of Directors approved a 25% increase in the quarterly dividend to 25 cents/share. The company's competitors include McDonald's (NYSE:MCD), Nestle (OTCPK:NSRGY) and Dunkin Brands (NASDAQ:DNKN).

Since the company initiated a dividend payment in 2010, the stock has returned 315%. Future investment returns will be dependent on growth in earnings and dividend yields obtained by shareholders, as well as the initial valuation locked in at the time of investment.

CVS Health (CVS) Dividend Stock Analysis

CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmacy Services and Retail/LTC segments. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions. The Retail Pharmacy segment includes retail drugstores, online retail pharmacy Websites and its retail healthcare clinics. This dividend achiever has paid a dividend since 1916 and increased it for 13 years in a row.

The most recent dividend increase was in December 2015, when the Board of Directors approved a 21.40% increase in the quarterly dividend to 42.50 cents/share. The largest competitors for Walgreen include Walgreen Boots Alliance (NYSE:WBA), Wal-Mart (NYSE:WMT) and Rite-Aid (NYSE:RAD).

Over the past decade this dividend growth stock has delivered an annualized total return of 11.40% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders.

Twenty Dividend Champions For Further Research

I have built my portfolio of dividend growth stocks over the past 8 – 9 years, by following a disciplined approach to investing. Having an objective approach has helped me immensely in staying the course, and not panicking and selling out when things looked difficult. As a general rule, dividend growth investors buy stocks to hold for years. Success is the result of an enterprise that is purchased at an attractive valuation, which then manages to grow earnings and dividends over time. This allows the investor to compound wealth and income, and ignore short term price fluctuations. The only exception to avoiding the moody Mr Market is when it offers quality companies at a discount. Getting paid to hold on to stocks has been helpful. Seeing the companies I own thrive, and boosting their dividends is helpful as well.

My process included a few simple steps, such as:

An Investment Plan Helps You Stay The Course

Over the past week, we have seen some crazy turbulence in stock prices.

When I saw S&P 500 futures down by 5% on Election Day, I was not happy. However, I saw it as an opportunity to add to my portfolio. Given the rapid overnight turnaround in stocks by the morning however, I was not able to capitalize on the weakness.

I did absolutely nothing all week, other than to initiate a small position in a few companies the day before. Other than that I didn’t panic on Election Day, and just held to my stocks.

As I have discussed before, I did not panic because I have an investment plan in place. My plan calls for maxing out my retirement accounts every two weeks through my paycheck, and then investing anything that is left over in my taxable portfolios. My investment decisions are mostly driven by availability of fresh capital to put to work, and investment ideas to a certain extent.

Building a Core Dividend Growth Portfolio With These Eight Companies

This is a guest post by Mike, aka The Dividend Guy. He authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate dividend investor.

I had the chance to start my investment journey at a relatively young age, I was 22 when I made my first trade on the stock market. Back then, I didn’t have a detailed investment process designed. If there is one thing that I have learned since then is that investing success goes through a solid investment process. If I want to build a strong portfolio, I must have a strong methodology to select the right companies. This is the way to go for any investing strategy, and it is also the case for dividend growth investing. 

I’ve noticed that not all dividend investors think the same. To my surprise, there are some important differences between most of us in the manner in which companies are selected. For example, I’m definitely not a yield seeker. In fact, if there is one thing I don’t consider during my investment selecting process, it is the dividend yield! I focus on the dividend growth as a pillar of my investing strategy. I’ve established 7 investing principles around dividend growth to manage my portfolio. 

I wanted to share these principles with you by giving you eight examples of companies that meet my investing criteria and should create a solid base for any dividend growth portfolio.

My take on HCP’s Dividend Cut

HCP, Inc. (HCP) is a real estate investment trust that invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing.

HCP (HCP) spun-off Quality Care Properties (QCP) unit on October 31. Shareholders received a share of QCP for every five shares of HCP they owned. After the spin-off, the company announced its new dividend of 35 cents/share, which was a decrease from 35.70% from the prior dividend of 57.50 cents/share. This ended the 30 year streak of annual dividend increases for this dividend champion. Of course, we do not know whether QCP will be paying a dividend, and what their dividend rate is going to be. If the new dividend was decreased by 20%, I would have viewed it as a dividend freeze, which is fine as the level of income generating assets is decreasing by 20% due to the spin off. Since the dividend decrease was not proportional to the amount of shares that were spun-off, I view it as a dividend cut.

Three Dividend Kings Raising Dividends For 60+ Years

A dividend king, is a company that has managed to boost dividends to shareholders every single year for at least 50 years in a row. There are 19 dividend kings in the US, which is an increase from the end of 2015, as Tootsie Roll (TR) joined the ranks of this elite list earlier this year. There were only ten dividend kings, when I first intriduced the term in 2010. Being a dividend king is an impressive achievement, because the last 50 years were a pretty turbulent time for business. Being a dividend king is not an automatic buy signal however. I believe that each dividend king should be studied in detail by enterprising dividend investors. This is because these companies have managed to survive the calamities and destruction of the past 50 - 60 years, while growing earnings, dividends and shareholder returns.

Over the past week, there were three dividend kings, which raised dividends to their shareholders. Each of these companies has managed to grow dividends per share for at least 60 years in a row. That is an impressive track record. If these dividend streaks were individuals we were talking about, they would have been eligible for Social Security within an year or so each.

The companies include:

Timing the Market Is Costly, Risky and Difficult

I invest for the long term. In my case, assuming I make it to my 80s, I am investing for the next 50 years. Incidentally, this period is much longer than the amount of time I have been alive on this earth. And looking back at the past 50 years, I am pretty certain that few people from 1966 would have predicted the things that happened between 1966 and 2016. Yet the 30 year old from 1966 probably had to make some estimates about life in the 2010s, despite not knowing what the future entails. I am in the same boat today.

Because I invest for the long run, I can afford to ignore stock price fluctuations, but instead focus my attention to investments that could generate the maximum amount of benefit for me for the next 40 – 50 years.

This very likely means that I will not be able to correctly predict any of the future bear markets we will experience from now until 2066. Therefore, it is unlikely that I will be able to sell high, and then buy low. Noone can do that successfully anyway. Market timing is a fools game.

I believe that investors should simply stay the course. When you try to buy and sell too actively, you increase the risk of making a mistake by an exponential factor. This means that people who sell today in anticipation of a correction will either:

1) Sell out too early. By the time a full blown correction/bear market happens, this person may be able to buy low, but they may end up doing as well as someone who simply stayed the course. This is costly, because this investor may get into the habit of forecasting tops, and missing out on future rebounds in economic and business activity.

2) Get out of equities on time perfectly, and then buying back on time perfectly. If this happens once in an investors timeframe, it is unlikely to be repeated again. You get lucky once, but chances are you will be unlikely to get lucky again. I got lucky once, but the amount of capital I had was much lower than today.

3) Get out of equities at the right time, but you end up buying back at the first dip. Then you watch your equities go down more, kicking yourself about your decision.

4) Get out of equities at the right time, and you end up missing out on the bottom, because you think that stocks will go even lower.

As you know, I have been writing about investments for about 9 years. I have observed a lot of investors in the meantime. Many were feeling uneasy about the financial crisis in 2007 – 2008. I am aware that some may have sold early, or too late. The problem is that many of those investors who sold, didn’t get back into stocks at all, or went back to stocks several years after the bottom in 2009. This  was when prices were much higher. I am also aware that there are many permabears, which have been forecasting doom and gloom since at least the late 1980s and early 1990s. These people have missed out on a great run in equities. The funniest thing about permabears is that they only look at stock price graphs when they evaluate when to buy and when to sell. They completely ignore dividends, and the power of reinvested dividends.

Dividends have historically accounted for 40% of annual stock returns. If you miss out on the power of reinvested dividends over long periods of time, you are missing out on the power of compounding. For example, if you have a stock yielding 6%, that never grows dividends, and never increases in price, a stock chartist would call this stock a dog and ignore it. But a patient long-term holder who reinvests dividends will have doubled their money in 12 years. The power of reinvested dividends is the reason why S&P 500 investor who bought right before the Crash of 1929 would have recovered by 1944.

Other reasons against selling include my experience, where I have found that the companies I have sold for one reason or another, turned out to do much better than the companies I replaced them with. This is a common finding from academic finance as well. The only thing that is certain when you trade too much is that you will pay a lot in commission and taxes. As we have seen with actual examples from the worst mutual fund in history, these are great ways to squander your capital. On the other hand, the static portfolio of blue chip dividend stocks that was set up in 1935 for the Corporate Leaders Trust has done phenomenally well for its investors.

All of this pondering made me start thinking about the future.

For example, I have reached my level of net worth and income, after accumulating assets for a little over nine years. I had done this in an effort to get to a point where I could be financially independent (FI). FI doesn’t mean doing nothing for me however. I may actually end up working much harder, once I have the security/safety net that a nest egg provides.

If I continue working and saving for another decade, I may essentially look at a future amount of cash savings, which may be equivalent to the amount of net worth I have today. So in reality, I have 85 – 90% of my net worth in stocks today, and 10% - 15% in fixed income. Over that next decade, I may earn and save an amount equivalent to 100% of my present day portfolio value. Those savings all come to me in the form of cash. This means that if you look at it from accrual accounting point of view, I have less than a 50% allocation to equities in 2026. If I then work for an additional 10 years, and my equities continue not growing, I will end up with something like 2/3rds of my money in 2036 in fixed income. (given the low interest rates, discounting at 2% will not materially alter these asset allocation percentages). This means that for someone who plans to save for at least a decade, and has invested for a decade prior to that, chances are that they are only halfway done with their journey. So given the relative low amount of current investments, relative to their full future potential, timing the markets may not be as worthwhile to you, even if your investment skills are much better than those of George Soros. It is time in the market that would do the magic for your future self.

Let’s put this example in dollars, as percentages could be confusing. Imagine that an investor today has a portfolio worth $200,000 today. They accumulated that over the past decade. Now let’s assume that this person can save $20,000/year ( let’s assume these are all real dollars that never lose value to inflation). This means that this person will have accumulated $400,000 within a decade ( $200,000 today and $200,000 over ten years). In reality, as peoples incomes grow over time, they may be able to actually save more as long as they are working.

This of course is a ridiculous way to look at things. But I have a point, I promise.

All I am trying to do is show that timing the market is an inferior strategy to time in the market. I define time in the market as the ability to plow money into your stock portfolio every two weeks or once per month (whenever you have the money to do so). This method of dollar cost averaging takes care of the ups and downs in stocks, makes sure the investor is invested at all times, and they are simply buying and holding for the long term. Countless studies have shown that the passive long-term buying and holding of equities can deliver a higher chance of wealth for the vast majority of investors out there, than actively trading in and out of investments. Dollar cost averaging is an investment process that is replicable/repeatable by anyone, and does not require any specialized investment skills, other than patience of course. Timing the market can only be done successfully by a very tiny minority of individuals out there.

I just wanted to show you that the amount of cash you may be trying to time the market with today is small relative to the amount of earnings power you will have to deploy at some point in your investing career. So rather than endlessly worry about timing the ups and downs of the stock market, and stock market crashes, you should worry about staying the course, and making sure you nest egg compounds so that it can provide for you in the future. It is unlikely that keeping most of your nest egg in cash or fixed income for extended periods of time would maintain its purchasing power.

Several investors I follow today are selling off large chunks of their equities, because they believe that “the stock market is overvalued”. I disagree with them that this is a good way to invest. This is because many of the indicators being cited are not good predictors of future performance. For example, the widely followed Schiller CAPE has not been found useful in timing the market (Source: Prof Damodaran). Research has shown that merely buying and holding has done better consistently than timing with CAPE. I have previously also discussed that the Schiller P/E is not useful to investors.

Let's walk through a few hypothetical examples. Imagine that you graduated college and started work in 1994. You then plow $10,000/year and put it into S&P 500 at the end of every year. By the end of 1999 you feel uneasy. You decide to sell everything and keep it in cash, waiting for a bear market.

You keep saving $10,000/year, and manage to put everything to work at the end of 2002. You then reinvest everything until the end of 2015. By the end of 2015 you have a net worth of $714,000.

Let’s compare that to a friend who simply reinvested $10,000/year into S&P 500 from end of 1994 to 2015. They would have a net worth of $521,000.

And let’s compare that to a friend who also started in 1994, and reinvested everything through 2007. The friend then sold out at the end of 2007, and kept everything in cash afterwards. They would have a little less than $319,000 in their possession by the end of 2015.

As you can see, there is a difference if you were able to call in the dot-com bubble early, and buy at the bottom, over buy and hold. The difference amounts to a little over $200,000. Unfortunately, if you were able to call in the 2007 top, but failed to put that money to work for you afterwards, you would have lagged a simple buy and hold strategy by $200,000. And if you panicked when Lehman went under in the middle of September 2008, sold out of everything, and never went back to investing, you may be even poorer.

While you may end up doing better than a buy & hold investors if you are a good timer, this opportunity is not “free” because you are taking substantial risks in the process. The risk is that in your trying to get that extra $200,000, you may actually make an error and end up costing yourself $200,000 (or even a higher amount). Even if you add in modest interest rates paid for holding cash, the opportunity cost of an error still looks very large.

I didn’t even calculate the opportunity missed for someone who merely stockpiled $10,000 in cash each year since 1994, merely because the stock market "was too high". And based on reviews of books and articles from the 1990s I have done, there were a lot of people who thought that stocks were “high” as early as the mid 1990s (some have been bearish on stocks as early as the early 1980s). If you sold out at the end of 1994, because the “stock market was high”, you would have missed out on more than quintupling your money (five times).

In case you think I am too harsh on those who sold out, I want to remind you that I actually hope they are correct, and we do get a bear market soon. If stock prices go down 15% - 20% from here, it would present a good opportunity for long-term investors in the accumulation stage like myself. When your future retirement income is available at a discount, you should get happy. Who wouldn’t like to have great companies, available at a discount?

I do disagree with those who are selling today, and hoping for lower prices, which may or may not arrive. And they may or may not take the advantage of those lower prices. But the decline in stock prices will definitely be taken advantage of, by patient buy and hold investors in the accumulation phase. The only super power you need to have, is the patience to continue executing your plan, even if you are under fire.

I am still holding on to my stocks ( directly in taxable accounts and through mutual funds in my 401 (k)) because I believe that equities will provide decent returns over the next decade. While there has been some short-term weakness in revenues, and profits for companies, a large part of that could traced back to the strong US dollar, weak international economies, and the weakness in energy prices ( which affects energy companies, and many developing companies that export commodities)

The reason why I am holding, despite the fact that equities may “look overvalued” is because:

1) Equities offer a better reward potential for the risk you take, relative to fixed income.

2) I believe equity earnings in 2026 will be higher than earnings in 2016.

3) I believe that dividends in 2026 will be higher than those in 2016, driven by fundamentals in point 2) above

4) I believe that higher earnings in 2026 will increase the value of companies I own in my portfolio

5) I am getting paid a 2% - 3% dividend per year to hold on to my stocks

6) I believe that all of this could translate into an equity portfolio doubling in value within the next 10 - 12 years

7) If I panic and sell, I will miss out on the power of compounding, and I will be selling low

8) By sitting still, I am taking advantage of the power of compounding in income and wealth accumulation. If prices fall from here, I will take advantage of them, by buying low. If prices go up from here, I will have kept a large portion of my assets invested at lower prices ( between 2007/8 - 2016).

9) It makes sense to hold some fixed income for diversification purposes, depending on age, risk tolerance etc. But this should not be used as a timing tool – in other words the percentage of my portfolio allocated to fixed income should stay relatively constant from year to year. In my case, I do not expect to own more than 20% in fixed income, until I am in my late 30s/early 40s (unless I plan to make a major purchase, such as a house, as it requires a 20% downpayment). If I get older, I may end up owning a little more fixed income as well, which is typical asset allocation advice.

Relevant Articles:

- Time in the Market Trumps Timing the Market
- Preparing for a Stock Market Correction
- Interest Rates Affect Stock Valuations
- How Dividend Growth Investors can prosper even if interest rates increase
- Time in the market is your greatest ally in investing

Avoiding High Portfolio Ownership of Successful Investments

I have been investing in dividend growth stocks for the past decade. There have been hundreds of other fellow dividend investors, who have also invested in dividend paying companies over the same period of time. There are some, who have invested for even a longer amount of time. Unfortunately, when you invest for a long time, you may end up with a few very successful positions, which account for a disproportionate amount of your portfolio.  The question I have been getting recently has been what to do in this situation. I would note that this problem generally happens to investors who are not adding money to their portfolios anymore. A few examples cited include Realty Income (O), V.F. Corporation (VFC) and Altria (MO), which have delivered fantastic returns since 2008 - 2009.

This of course is a great problem to have. If you are a long-term investor, it is very much possible that after a decade or two of patient investing, the power of compounding will result in many companies which not only pay more and more in annual dividend income, but also result in large unrealized gains for the stockholder. As a result, there may be several companies in your portfolio, which could end up with a very large portfolio weight. In my opinion, you own too much in an individual security if it accounts for more than 4% - 5% of your portfolio’s value.

This article only deals with individual stocks/securities – it is not relevant to mutual funds or exchange traded funds. In some situations like these, investors end up putting their whole portfolio in just one diversified fund, and this could actually be a prudent move from a diversification perspective.