Recent Buy

buyGetting the month started off right!

I suppose cash, when I have it, just burns a hole in my pocket. Maybe I need new pockets? Or maybe I just need more cash?

Either way, I didn’t wait long to put some capital to work this month. I’m actually a bit light on capital right now, which means this may be my only stock purchase for December. I might have enough for a smaller buy later down the line, but I’m also okay if this is my only activity this month.

I purchased 15 shares of Walt Disney Co. (DIS) on 12/4/14 for $93.35 per share.

Overview

Walt Disney Co., together with its subsidiaries, is a diversified global media conglomerate.

They operate through five segments: Media Networks (43% of fiscal year 2014 revenue); Parks and Resorts (31%); Studio Entertainment (15%); Consumer Products (8%); and Interactive (3%).

Disney owns a number of different, but complimentary, businesses in media and entertainment. Perhaps most well known, they own and operate the Walt Disney World Resort in Florida and the Disneyland Resort in California. They also wholly own, have ownership interests, and/or collect royalties from a number of related parks, cruise lines, and resorts across the world.

But the company is much more than that. They have rather substantial assets in media broadcasting, including the ABC broadcast network and eight television stations. In addition, they own cable assets in ABC Family, Disney Channels, a 50% stake in A&E Television Networks, and an 80% stake in ESPN.

Studio entertainment includes live-action and animated motion pictures, direct-to-video content, musical recordings, and live stage plays. Distribution of this content is primarily through the Walt Disney Pictures, Pixar, Marvel, Touchstone, and LucasFilm brands.

Of course, they also work with publishers, licensees, and retailers throughout the world to manufacture, market, and license consumer goods based on their intellectual property.

Fundamentals

So Disney is a well-known company. But perhaps what isn’t as known is actually how they perform as a company. It’s easy to assume they print money if you’ve ever been to one of their parks or stood in line waiting for one of their movies, but let’s see exactly how all of that consumer interest translates into top line, bottom line, and dividend growth.

Their fiscal year ends September 30.

Revenue grew from $31.994 billion in FY 2005 to $48.813 billion at the end of FY 2014. That’s a compound annual growth rate of 4.81% over that time frame. The top-line growth wasn’t as impressive as one might suspect,  but it wasn’t lumpy. Other than a drop in 2009, it’s almost as if the Great Recession didn’t even occur.

Earnings per share improved from $1.24 to $4.26 during this period. That’s a CAGR of 14.7%. That’s a bit more like it, and serves to show just how much and how fast this company is indeed growing.

S&P Capital IQ predicts EPS will grow at a compound annual rate of 14% over the next three years, in line with their recent historical average.

Now, DIS isn’t a prototypical dividend growth stock because they held their dividend static throughout the Great Recession. Furthermore, a low yield and annual payout just adds to its undesirability for some. I regret letting these qualities prevent me from investing much sooner, but I’m rectifying that now.

The company has been actively and aggressively increasing the dividend for the past five consecutive years, with the most recent dividend increase of 33.8% announced just two days ago. Over the past five years, the dividend has increased at a compound annual rate of 30.2%.

The stock currently yields 1.23% here, which does leave a bit to be desired.

However, a very low payout ratio of just 27% means the odds are very good that the dividend will continue increasing at a rather generous rate. Combining that low payout ratio with a high growth rate in the underlying business portends plenty of large dividend raises for the foreseeable future.

The company did have to issue shares for some acquisitions over the last decade, notably with the Marvel deal. However, they’ve been reducing their share count since 2011 – down from a bit over 1.9 billion shares to just over 1.7 billion shares now. They have an ongoing open repurchase authorization for up to 400 million shares with no expiration date, of which a substantial portion have already been repurchased leading to the reduced share count since the 2011 authorization began.

DIS maintains a superb balance sheet. The long-term debt/equity ratio is 0.28, while the interest coverage ratio is 42.65. These numbers are especially impressive considering the acquisition spree the company has been on over the last decade – long-term debt has barely budged over the last 10 years, even while the company has expanded immensely.

Profitability is sound. Net margin has averaged 12.92% over the last five years, while return on equity has averaged 13.93%. Both of these metrics have been improving markedly over the last few years.

Qualitative Aspects

Disney sports one of the widest economic moats out there, in my view. They have a collection of unique, renowned, and sought-after characters across their parks, cruise ships, broadcast networks, cable networks, movies, and products that would be nearly impossible to replicate by a competitor. And the staying power of their classic characters should be well understood by now, with Mickey Mouse dating back to 1928.

In addition, they’ve been heavily bolstering their core business around new and exciting brands and characters. Incredibly intelligent and successful acquisitions like Pixar, Marvel, and Lucasfilm over the last decade has led to a string of successful movies like Toy Story 3, Frozen, and The Avengers, along with respective licensing and products. Furthermore, upcoming projects like The Avengers: Age of Ultron and Star Wars: The Force Awakens have a ton of potential. These acquisitions help Disney cross the bridge from childhood to adulthood, which allows them to scale their consumer base dramatically. And every new successful project allows Disney to reap rewards for years, or even potentially forever.

I also find Disney’s willingness to go beyond traditional media refreshing and smart. For instance, they own a 33% stake in Hulu. And a recent acquisition of Maker Studios, a digital network on YouTube, gives them access to online content.

Their core broadcast and cable media offerings are among the strongest in their respective categories. ESPN is the crown jewel here, with the highest subscriber fees of any cable network. Exclusive long-term sports broadcasting rights, like Monday Night Football, keeps ESPN as the dominant sports content provider.

Risks

Disney’s risks include broader economic slowdowns, which could limit demand for their theme parks, cruise ships, and resorts. In addition, cable subscription cancellations would reduce demand for and the fees driven from their cable networks. They also have to constantly be able to adapt their content to current consumer demand and interest.

Valuation

Shares are offered at a P/E ratio of 21.91. That’s a bit higher than I’m usually willing to pay for a business, but DIS appears to be particularly high in quality. This ratio does compare unfavorably to their five-year average of 17.2, however. Although, some of their more notable acquisitions have been more recent.

I valued shares using a dividend discount model analysis with a 10% discount rate and a two-stage growth rate: 20% dividend growth for years 1-10 and a 7% terminal growth rate. I used a two-stage model due to DIS’s low yield. The growth rates I used appear to be reasonable to me based on Disney’s historical results, low payout ratio, and penchant for rewarding shareholders with generous dividend increases now that the financial crisis is behind us. The DDM analysis gives me a fair value of $117.06.

I think an argument could be made that DIS is at least fairly valued here, if not offering a solid margin of safety. Considering the fantastic business model, I’m willing to even go so far as to pay a premium for shares. But I honestly don’t feel shares are priced at a premium right now, which is a solid opportunity, considering where the broader market is at.

Conclusion

Disney is one of the best, if not the best, media production and entertainment company available for investors, in my humble opinion. Their characters span from Mickey Mouse to Iron Man to Darth Vader. I’ll be honest and admit that I’ve been somewhat influenced by Warren Buffet here. His longstanding desire to own assets in media is well-documented, and re-reading his biography shows the lengths he went to to invest in newspapers and broadcast media, leading to longstanding friendships with luminaries like Katharine Graham and Tom Murphy. And even recent moves within the Berkshire Hathaway Inc. (BRK.B) portfolio shows a continued desire to invest in media and content delivery. Until this purchase, I lacked any kind of investment in a major content production company, let alone a company of the quality that Disney offers.

I regret not investing in Disney earlier. I kept passing it up due to its low yield, annual payout schedule, and perceived lack of clear-cut value. Furthermore, its stock has been almost straight up since late 2011. But I decided to initiate a position here at what seems like a solid value for the long term. I regret not buying Visa Inc. (V) back in the $90s when it featured a similar yield and valuation. I decided not to make the same mistake here with Disney. And the dividend announcement two days ago was the impetus I needed to put some capital to work here.

I’m going to include a couple of other valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar rates DIS as a 3/5 star value, with a fair value estimate of $95.00.

S&P Capital IQ rates DIS as a 4/5 star “buy”, with a fair value calculation of $100.60.

This purchase adds $17.25 to my annual dividend income, based on the current $1.15 annual dividend.

I’ll update my Freedom Fund in early January to reflect this recent purchase.

Full Disclosure: Long DIS and V.

What are your thoughts? Are you a fan or shareholder of DIS? Why or why not? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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167 Comments

  1. Disney is a hard one for me. For many years I was a ultimate fanboy of Disney and even now I still like them, but I kind of feel now that they have gotten a bit too top heavy. From a corporate standpoint they are management heavy and from a family value they are very expensive. I recently with with Cedar Point (stock sticker FUN) for my stock pick in the entertainment category. Good luck on the Disney pick. I will say that I saw a drawing today that replaces toon town at Disneyland and creates a new Star Wars Village, might be interesting. Plus, the new Avatar land at Walt Disneyworld looks to be amazing.

  2. I like the buy. Especially considering that from one of your previous posts you were talking about want to add more long-term growth stocks, ex. Visa like you mentioned. Where the div yield is lower, but has higher potential for capital growth.
    Disney is also pumping out a lot of good movies for the foreseeable future, and I read an article highlighting massive movie theater growth in China, its just a shame they limit/actively hold back non-domestic films. All these blockbusters are part of the reason why im considering picking up Cineplex (CGX) which is similiar to a REIT which owns and manages Canada’s largest chain of movie theatres.

  3. Hi DM,

    “I regret not investing in Disney earlier. I kept passing it up due to its low yield, annual payout schedule, and perceived lack of clear-cut value.”

    That’s me as well. I put off getting into Disney mainly for the annual payout schedule and lack of dividend growth history. After five years, I finally pulled the trigger in 2012. 34% dividend growth on a low payout ratio says to me DIS will keep this up for many years to come.

  4. John,

    FUN is interesting. I’ve had a lot of fun at Cedar Point over the years, though the two-hour waits in line in the hot sun aren’t my favorite way to pass time. I’ll probably never go there again, considering I live in Florida, am now a Disney shareholder, and Disney World is only two hours away. But if I were to ever make it up that way again I’d definitely spring for the bracelet that allows you to skip the lines.

    I like the fact that that Disney is great at cross-promotion and maximizing the value out of their investments. They closed on Lucasfilm and had J.J. shooting pretty quickly. Then comes the products and park entertainment. Revenue on top of revenue. Gotta love it.

    Thanks for dropping by!

    Best regards.

  5. DW,

    Absolutely. I’ve been looking for opportunities to add quality “Stage 3” stocks to the portfolio. This one makes a lot of sense right now, along with Visa. Nike, Starbucks, and Costco are a few others that might make sense at some point.

    I’ve heard of Cineplex from a few Canadian investors. Interesting that they operate as a REIT. I’ve heard that the margins at movie theaters were pretty slim, but I’m sure that’s something you’ve looked into.

    Thanks for dropping by!

    Best wishes.

  6. LDG,

    You got in at a better time than I did. The stock has been like a rocket over the last few years. I have only a few regrets, but DIS is one of them. I’m happy to establish a position here, at which point I can consider adding down the road. I actually wouldn’t mind making DIS a core position.

    I definitely agree with you on the dividend growth. I think double-digit dividend raises are realistic for the next decade. They’ve got so much going on right now. Very exciting stuff.

    Happy to be a fellow shareholder. 🙂

    Take care!

  7. Yeah, CGX seems to be a pretty popular one. I’v also seen it in a lot of Dividend/Monthly paying ETFs/Mutual funds as well. While it is not an actual REIT(so not taxed/forced to payout like one) CGX does pay a consistent, and consistently rising monthly dividend. And the payout ratio is fairly close to their EPS as well. I just took a quick peek at the financials and they seem to have up an down years, where some they make a lot more than the Div, and some they make a bit less.

    Heh, and that $17 added to your annual dividend income can almost buy you a VIP theater seat ticket!

  8. IT’S ABOUT DAMN TIME YOU BECAME A DISNEY SHAREHOLDER! 🙂 Welcome to the club!

    I absolutely love DIS, both as a shareholder and as a fangirl. When I began investing, I knew right away I had to include it in my portfolio, despite the low yield, high P/E, and the annual dividend. The influence they have over multiple generations is enough for me to know that Disney is here to stay for decades. Doesn’t hurt that Iger’s contract has been extended yet again. The man is brilliant!

    Speaking of Disney, have you seen the new Star Wars VII trailer?! I was so excited I nearly peed my pants!!! 🙂

  9. My family bought me 12 shares in the ’98. Purchase price of about $27. I wish I had DRIP’d that whole time… Couple weeks ago I re-upped 15 shares for $89.94. I don’t think there can ever be a bad time for a purchase in DIS. It truly is the best of it’s sector, despite the low entry yield. I would like to note that as of today, the Y/Y price/share hold a ~27% increase if my math is right, and a dividend increase of ~36%. I think that is a more than healthy raise, and proof they are going to continue to reward shareholder. Great buy Jason!

  10. You just can’t help yourself can you. 🙂

    I wouldn’t have considered Disney prior to your post, mainly due to their low dividend, but you make a compelling case. They certainly look like a company that growing at an exciting rate, whilst maintaining a lot of stability.

    As a comment above mentioned, I think Star Wars is going to be huge for the company.

    Thanks for sharing!
    Huw

  11. Though I’m not a shareholder of DIS, it is one of those classic long term investments that are often gifted to children, newborns, etc. It has an amazing dividend track record and long term growth and I recall you mentioning, more than once in comments etc. how you hope to join other DGI bloggers in this stock and become a fellow shareholder. Nice change of pace from energy to say the least. Good call for this long term winner.

  12. Jason,
    As you probably already know, I am a huge fan of Disney. If I has to put all of my money into one stock, it would be Disney. I have a cost basis of $89.45 and own approximately 8 shares. I want to double this very soon before the price hits $100/Share. I certainly don’t want to hit the buy button at that point. Very great buy and keep it up!

  13. I just happened to be watching the Mickey Mouse Club with my daughter when I saw your post! Having young children definitely opened my eyes to how ubiquitous the company is and how powerful its influence on children can be. My two year old loves Mickey and Minnie and absolutely adores all things involving princesses, especially Frozen, which is generating huge revenues for the company. It was after taking her to a live Disney on Ice show and witnessing how much all the other parents were spending on souvenirs that we decided (after some further research on fundamentals) to invest in the company. I’d always wondered if DIS would ever catch your eye, though I suspected the lower yield and annual payout was probably holding you back. Nothing like a 34% dividend hike to get a dividend growth investor’s attention. The future looks bright for Disney, and if my daughters have anything to say about it, the company will keep making money and increasing dividends!

  14. I love nice moats and timeless assets. The Disney stable of characters is going to remain relevant even if the method by which they are delivered to our eyeballs changes 🙂

    I’m a big fan of this buy for the long term, and I tend to think that paying a premium for this sort of “signature” company is a reasonable thing to do.

    Great analysis, I always learn something when I read your breakdowns.

  15. Congrats Jason – an excellent purchase that you really cannot go wrong with!

    Had I not loaded up on COP and KMI (during the fire-sale), I would join you as a fellow share holder on this one!

    Having two kids and having visited DW like 10 times in the past, I think this stock will be an excellent long term play.

    Man, I have to give you credit, you keep “chugging” along in the right direction!

    Best regards,

    Ray

  16. (Singing in my best mouse voice) M-I-C-K-E-Y, Why because it pays a dividend of course.

  17. DM

    Disney’s yield is low and PE is high at the moment. Long-term growth is a strong possibility but I just don’t like investing in media/entertainment companies. Not my cup of tea.

    Energy stocks are getting hammered at the moment. I’m averaging down and investing for the long-term.

    Good luck !

  18. Congrats on becoming a shareholder Jason. While I don’t have any plans to put a lump sum amount into DIS, as I plan my future Loyal3 purchases, they will be a part of the long-term DCA investment plan I am putting into place. Never a great value, but something you want to own, now, and in the future.

    As an aside… as a kid I read countless Star Wars books… pretty cool to see them continue to expand on the franchise. I know I’m pumped.

  19. Jason,

    I just saw disney announced a 34% annual cash dividend according to thestreet.com. Link to article:

    http://www.thestreet.com/story/12974410/1/disney-dis-stock-higher-today-after-announcing-34-annual-cash-dividend-increase.html

    Disney is a great company. I really don’t think you can go wrong here. I am still building my portfolio right now, so i need continue adding to high yielders, but for someone approaching the 200k mark as you are, this stock is a no brainer! I am sure you will see plenty of appreciation over the life of owning this particular stock. Good buy!

    Josh

  20. Cant blame you for picking this up, Jason. I really like DIS and will have to look into it closely to add to my portfolio. I looked into it a year ago and the small dividend stopped me from initiating a position. Like you said, the high PE makes it expensive at the moment, but you gotta payup for quality names. Great purchase, imo. Congrats on adding $17 to your FY dividend income.

    cheers
    R2R

  21. Great buy Jason, in my view DIS is bluest of blue chips, you keep accumulating them whenever you have some money, it is very difficult to watch and get this stock at low price, I saw it at 70,80, 90, it keeps going up, so I decided to do dollar cost average in LOYAL3 on this stock, i will be keeping it for long long time..

    Best regards
    Balaji

  22. DM,

    Excellent investment. I am also a shareholder of DIS, started last month through Loyal3 and I plan to up the share count next year. Smart move sneaking in before the EX-Div date, especially considering they raised their annual dividend. DIS should be paying handsomely for years to come.

    Recently I went on my honeymoon, while I was in the Caribbean every person said the best cruise in the world is by Disney. Especially, but not only, for those who have kids. Their parks and entertainment products are always top notch, and to top it off they have a store in almost every mall in the USA. Moat might be the wrong word to describe them, they are a machine.

    – Gremlin

  23. Congrats on the purchase and glad to have you as a fellow shareholder. I initiated position in DIS few weeks back and have been buying DIS as part of my weekly purchases. Have built a small position and looking to add more during the next few weeks based on prices. Even though the yield is low right now, the growth has been good and the recent dividend increase is definitely a good sign.

  24. Josh Larsen,

    Happy to join you here. 🙂

    Sounds like a great family there. I wish I would have been exposed to stocks through something like that. Those 12 shares didn’t cost much, but they not only turned into a much larger piece of wealth as the business has grown, but you learned a lot in the process. Good stuff!

    I anticipate continued good things. The Marvel acquisition is turning out to be pretty solid. While there is risk of saturation there, we’re talking about a lifetime investment. Same goes for Lucasfilm. The movies are just one piece of the puzzle. Their multi-platform business allows them to cross-promote and integrate extremely well.

    Thanks for dropping by!

    Cheers.

  25. Huw,

    I definitely cannot help myself. Like some people spend cash almost as soon as they get it down at the mall, I spend mine fairly quickly on stocks. 🙂

    Disney won’t suit all investors out there. The annual payout and low yield are definite drawbacks, but I think the business is excellent. The most recent dividend increase was the shove I needed in the right direction.

    Have a great weekend!

    Best wishes.

  26. I usually like your buys and your long term strategy but I really don’t see how DIS fits inside your “divedend mantra” freedom fund. It seems like a position more for a growth portfolio than a dividend income portfolio.

    As you noted yourself, it’s yielding less than 2% which is lower than current inflation. You’re goal is to eventually live off your dividends, I don’t see how buying a stock at such a low yield helps you reach your goal. Even if they increase their dividend 50%, you’d still probably lose to inflation. You could easily get more dividend income for you money by initiating further positions in KMI, O, KO, etc.

    I actually like DIS and own some in my Growth portfolio, but this seems like a radical departure from your strategy.

  27. Seraph,

    Haha. Happy to join the club! 🙂

    I agree with you 100% on Iger. He made the move on Pixar right away after Eisner couldn’t seem to get it done, which was obviously a great acquisition. And everything since then seems to have panned out nicely. Some of the forays into online content could go either way, but I like the fact that they’re making moves there. Shows they’re not staid or complacent.

    That new trailer is awesome. I’m very, very excited to see that movie. Looks like J.J. stayed pretty true to the original trilogy, and I certainly like what he’s done with Star Trek. Should be a great movie!

    Have a great weekend over there.

    Best regards.

  28. DivHut,

    I still think there’s value in energy, though that all depends on how long oil stays depressed. If it’s a protracted drop, then some of those stocks have a long way to go. That said, I wouldn’t mind averaging down on NOV, as I thought it was already fairly cheap.

    But DIS is almost immune to economic cycles. They barely skipped a beat through the financial crisis. In fact, my significant other’s ex-husband works at Disney World. She remembers that he was really concerned about a slowdown at the park, but was surprised by the fact that it was as busy as ever throughout the Great Recession. Good stuff.

    Thanks for dropping by!

    Take care.

  29. DM,

    Welcome to the club! Wear those mouse ears with a smile 🙂

    Glad you didn’t miss the boat and the ex-dividend date for that matter. I’m still reeling a bit from coming SO CLOSE to grabbing Visa when it dipped below $210 a couple months ago, and kick myself for missing that opportunity (among others). I highly doubt you’ll regret this move, and the reward certainly outweighs the risk.

    Best,
    DWC

  30. DM,

    Happy to join you as a shareholder. I also wouldn’t mind increasing my position here in short order. Really depends on capital and other opportunities. But I could see DIS becoming a core holding as time moves on, assuming they continue to make the right moves.

    They’re just a media powerhouse. There’s no other company out there like it, which is why I think their moat is so wide. They have a market cap of over $150 billion, but I can’t see how a competitor could take $150 billion and recreate anything close to what Disney has. Just couldn’t be done, in my view.

    Have a great weekend!

    Best wishes.

  31. Chris,

    Frozen has been an absolute killer for Disney. I don’t have young children, but even I can’t escape that song. I used to say “Again???”, now I’m saying “Sing away!” 🙂

    Although, it’s not just a child thing anymore. Their platform expansion has allowed them to expand their demographic reach in a big way. Now they’ve brought on fans of Marvel and Star Wars. Good stuff!

    I remember that one of my co-worker’s wives was a HUGE fan of Disney. She collected all kinds of stuff related to Disney. I mean they spent a lot of money on Disney gear, from what I recall. So this company has a way of really affecting people in a unique and genuine way, which is refreshing.

    Appreciate you sharing there. This is one of those few companies where nothing is going wrong for them right now, which is why shares are where they’re at. But I still think the price is fairly attractive, or at least fair. Nothing wrong with paying up for something high in quality.

    Cheers!

  32. FW,

    Thanks for stopping by!

    I’m with you. I love businesses with wide moats, as that means they should stay relevant for a while. And I happen to think, after really studying Disney for about a week, their competitive advantages are some of the best out there.

    Glad you enjoyed the analysis. I try to bring the numbers, but also break it down into layman’s terms as far as what the business does and why it should be a good investment. I’m not trying to talk anyone into investing with me, but rather just putting the thesis out there.

    Hope you guys have a great weekend!

    Best regards.

  33. DM, in your research has the payout ratio changed, Was the payout ratio much higher when they weren’t raising the dividend? I guess if they froze the dividend and nothing changed but they just unfroze it 5 years ago that seems a bit shady, and I think you forgot that alot of their business models are cyclical, maybe they’ve just done a good job at managing those, one of your other commentators already hit on that Div payout thing but I just don’t see it as a good buy for a div investor… overall now, that’s a different picture. I have wanted to get some of that market into my portfolio and there are some options, I’d love to see a comparison of Disney and some of their competitors even though they’re not as diversified as Dis is.

  34. Ray,

    Thanks for the support!

    Can’t blame you for loading up on energy, especially KMI. They should be very lightly affected by the oil drop, yet they were hit almost as hard. Pipeline plays will be around and profitable for a long time. 🙂

    I’ve only been to DW twice. Once as a kid and once a few years ago. Claudia’s ex-husband (who she’s still close with) works there at a restaurant. Anyway, he’s usually able to get us a deal, and we went to Epcot a few years back. It was nice. Some of the best food I’ve ever had in my life. They take their food seriously at that place, no doubt about it.

    Thanks again for the comment!

    Cheers.

  35. Sam,

    Disney definitely isn’t for everyone. The low yield an annual payout in particular will probably turn some investors off.

    Thanks for dropping by and sharing!

    Cheers.

  36. W2R,

    I’m really glad they wasted no time getting J.J. in gear and putting together the first movie. Looks like he’ll do right by fans. Everyone who’s had anything to do with the movie has had nothing but good things to say. The relative lack of CGI alone is a big improvement, in my book.

    Right. Disney is almost never “cheap”, but the price seems very reasonable considering the growth potential and quality. I’m not sure this valuation is a “new normal” for DIS, but it’s certainly a different company today than it was even five years ago. It’s about as bulletproof as a media company gets. The move to online content is a potential source of Kryptonite, but they’re embracing that as well. We’ll see how it goes! 🙂

    Have a great weekend over there.

    Best regards.

  37. Josh,

    Yep, that dividend increase was announced back on Wednesday. That was all I needed to go forward and invest. I mentioned the dividend increase in the article. 🙂

    I hear you on your position. I wasn’t interested in DIS a couple of years back for the same reason. I regret that now with hindsight on my side, but I just didn’t have the room for it. Now that my life has changed and the portfolio has grown, I can make the case for a few stocks like this.

    Best of luck building out your portfolio. I’m confident you’ll one day be in the same position, rounding out the portfolio as you wish.

    Thanks for stopping by!

    Cheers.

  38. R2R,

    Sometimes you gotta pay up. Though, it seems that the consensus is that DIS is possibly undervalued. In the worst case, it’s fairly valued. And I’m okay paying a fair price for an excellent company. 🙂

    But DIS won’t suit everyone. I certainly can see how the low yield and annual payout detracts some investors. But now that I’m a shareholder, I’m glad for that – more shares for me!

    Best wishes.

  39. Balaji,

    Sounds like you made a great move there. Tough to catch DIS on a drop, as it hasn’t really done so for years now. But averaging in increases your ownership stake as you have capital. I can’t see how Disney isn’t a more profitable monster 10 years from now, spitting out a lot more dividend income.

    I’m a happy fellow shareholder. 🙂

    Take care.

  40. Gremlin,

    I definitely wanted to get in before the ex-dividend date on this one. I usually don’t time my buys around the date too much, but an annual payer like DIS practically required it. 🙂

    Thanks for sharing that. I’ve never been on one of their cruises or even heard from someone who had. Good stuff. It seems like almost nobody has anything bad to say about Disney. One of the few companies out there like that. But I agree with you on their moat. I’m not sure if they make a drawbridge long enough to cross that thing.

    Have a great weekend!

    Best wishes.

  41. DGJ,

    Nice move there. The dividend increase, like the last few, was a monster. Even better than my recent Visa dividend increase. I’m in love. 🙂

    I’m actually considering making DIS a core position, up there with JNJ, KMI, and the like. It’ll take time, but I can see myself allocating some capital to DIS throughout 2015. Wish I would have started earlier, but the same could be said with a lot of companies. Gotta roll with the punches.

    Thanks for stopping by.

    Best regards.

  42. Welcome to the Disney band wagon. I have been a shareholder since around the Highschool Musical days. About every 2 years or so Disney puts out some major must see product, what was Frozen 2 years ago except ice in a freezer! You talk about waiting in lines in hot weather to ride rides, not at Disney they are mostly air conditioned and themed to keep your mind off the wait. They have it down to an art form.
    The real question here is when are you going to break tradition and buy some Berkshire Hathaway? Surely you are not going to go to the annual meeting a non shareholder? I think it would be a good time to look at that Roth we talked about before, you can always pull out your original investment.

  43. Etraitor,

    I disagree.

    Inflation is a measure of change, or growth. I look at the dividend growth rate of the companies I’m invested in, and compare that to inflation. Over the long haul, DIS’s dividend growth will probably exceed inflation by a good margin. Thus, my purchasing power increases over time. In addition, you’re looking at the dividend as it sits now. I’m looking at what the dividend might be 10 or 20 years from now.

    “You could easily get more dividend income for you money by initiating further positions in KMI, O, KO, etc.”

    I could do that. But I’m also interested in value, diversification, and total return. I don’t happen to think O is a good value right now. And KMI and KO are already large positions for me, with KO featuring less growth and a higher valuation than DIS.

    Really all depends on your perspective. But I think DIS is an excellent business. I’m not just an investor looking for maximum income now, as I’m 32 years old. I have to be thinking about the 50 year-old version of Jason as well. If I was after the most income now, I’d be investing very differently. Remember the middle word in dividend growth investing, and take a look at Disney’s dividend growth.

    Again, DIS isn’t for all investors. But now that my portfolio is nearing $200k with more than $6,000 in annual dividend income, I think I can stretch for the occasional investment like DIS, as I’ve talked about and done before (V).

    Thanks for dropping by!

    Best wishes.

  44. DWC,

    Thanks. Happy to be part of the club. I happen to think it’s one of the better clubs I’ve joined. 🙂

    Yeah, I wanted to get in before the ex-dividend date on this one. They may not pay much, but I’ll be damned if I won’t collect what they’re paying!

    I happen to think V at $93 was one of my big misses. I regret that. But it was offered at a similar price, valuation, and yield as what DIS sports today. I thought about that for a while, and realized that I might have a similar opportunity on my hands right now. Decided not to let it pass me by. I’m not saying DIS will double over the next few years, but I also wouldn’t be totally shocked about it. I hope to continue building up this position over the course of 2015, along with a few other names I have in mind.

    Cheers!

  45. Joe,

    “Was the payout ratio much higher when they weren’t raising the dividend?”

    It doesn’t appear so. The payout ratio through the Great Recession looks like this:

    2008: 15.4%; 2009: 19.8%; and 2010: 17.2%. So it stayed pretty steady, with 2009 creeping up a bit due to lower earnings.

    Many businesses are cyclical. I’d argue, however, that DIS is not one of those. I’d recommend you take a look at the financial statements for yourself, but their results are not lumpy, as I stated in the article.

    Again, DIS isn’t for everyone. I’d especially say that for those just starting out, where income to reinvest is at a premium. But I’m at a point now to where I have room for companies like this. Then again, if I would have invested in DIS back when I first started out, it would rank as one of my greatest investments.

    Cheers!

  46. Shane,

    Glad to join the club here. Like I said in a previous comment, it appears to be one of the better clubs around. 🙂

    The future looks bright. Huge movies coming up, great media assets that are cranking out revenue all day and night, and their product offerings will only continue to expand as they’re excellent at cross-promotion and integration. It’s a very unique company.

    Unfortunately, the buck stops at Berkshire. No dividend at all is where the buck stops for me. Great company, and no doubt it’s been one of the greatest investments of all time. But I don’t know how much longer Buffett will be around, and it just doesn’t even come close to suiting my needs. I plan on going to the meeting with a ticket, just like everyone else. However, I won’t be a shareholder. I doubt they’ll kick me out. 🙂

    Have a great weekend!

    Best regards.

  47. I’d be rather reluctant buying a half-cyclical company when it boasts a PE of 20+ – because it’s almost certain that you’ll be able to buy it much cheaper at some point during the next years.

    Its earnings growth is good, its robustness is good, but there have to be cheaper alternatives.

    As always though: good luck, Jason!

  48. Disney is a great growth stock to own, but the stock is priced for perfection right now. The current straight up run since 2009 has a striking resemblance to a similar run back in 1992-1998, which was followed by a decade of zero return despite great fundamentals, because the stock was priced for perfection in 1998. It’s all about the price you pay.

  49. Nice buy, I added to my Disney position last week around $91.8.
    I knew the dividend was coming and was hoping for a 20% increase, so a 33% increase is awesome.
    To me with Disney owning both parts of the content creation side (IP) as well as parts of the distribution side (their television networks and parks), they have a strong moat.

    I’m getting a bit interested in TD and BNS and also will continue to buy CVX and XOM if they drop lower.

  50. I’ve also started to shift the mindset a bit from focusing on current yield to focusing on dividend growth rates as well as total return.

    The prior dividends and investments in the bluest chip holdings will pay out for years to come, and hopefully allow a shift into more blue chips as well as some higher growth names.

    One interesting analysis would be to learn how to find the blue chips before they become blue chips. I wonder if they have any common features when they are still growing rather than once they’ve hit maturity.

    I suppose that was the intent for me getting into WFM and SBUX, but we shall see. I think the risk/reward is still positive since by the end of 2015, both of those purchases will be under 2% of my portfolio, down from 3% today, and continue decreasing thereafter.

    A benefit, and curse, of having a huge portfolio with many small holdings is that you can (and sort of need to) reinvent the strategy in order to keep charging ahead. Looking forward to more calculated risks ahead!

  51. I must be looking at the wrong criteria when I look at DGI stocks. When I see a stock that provides a yield of 1.23%, I just ignore it and keep on looking for a higher yield. Yes, I look at dividend growth rates, but still, I think I would have dismissed Walt Disney Co. This is why articles such as this are such a great education.

  52. Difu Wu,

    No offense, but I find it strange that you thought I shouldn’t have sold Sysco at more than 25 times earnings, yet you also think Disney – a company that’s growing more than 10 times as fast – is priced for perfection at 22 times earnings.

    “…because the stock was priced for perfection in 1998.”

    Well, let’s take a look. Disney was priced at about $42 during its peak in 1998. Its EPS for that year was $0.89. That means Disney was trading hands at a P/E of ~47. Are we really comparing a smaller Disney at 47 times earnings to a much larger and robust Disney at 22 times earnings? Please tell me this isn’t so.

    Take care!

  53. If I had to pick 3 stocks for the rest of my life (I’m 32), they would be (in no order): Disney, Johnson & Johnson, and Starbucks. You now have two of the three….time to get your cup of SBUX and round out the list!

  54. No I am sure you are safe. My wife works for one of the companies that he has scooped up so we actually own a bit through her 401k. Thought about crashing your honeymoon but my wife would rather have a root canal and there are a lot of beaches that serve fruity concoctions with nice little umbrellas on top calling my name. Be sure to fill us in afterwards and I’m sure it will be as if we were there with you.

  55. AT,

    Nice buy there. Disney has been on a tear, and rightfully so with the moves they’ve been making. I’ll most happily add if the stock pulls back substantially and I have some capital available.

    I hear you there on the content and distribution model. There’s no other company that I can think of that does it quite like Disney. At least, not in the same robust and successful manner.

    You might have your opportunity with BNS. Down more than 2% today. It’s trading a bit below my cost basis, which makes it interesting for me. Great yield from a player in an oligopoly up there.

    Best regards!

  56. DIS seems like a great buy! I have been waiting for a dip to coincide with some free capital, but just have not had the opportunity yet.

    Seeing you buy here has added a third point of indecision to my previous hair-pulling over grabbing BBL (which all of my investing idols seems to be grabbing) and ARLP (which seems great on paper, but no one has ever mentioned) today. There are worse things than too many options though 🙂

    Keep up the great work, you inspired me to start my path of dividend investing!

  57. Ravi,

    “The prior dividends and investments in the bluest chip holdings will pay out for years to come, and hopefully allow a shift into more blue chips as well as some higher growth names.”

    Exactly. Once you have the foundation set and in place, it’s time to just let it play out. Some of the companies I’ve invested in, like KMI, are to the size in my portfolio now to where I’ll probably never have to invest again. They’ll just grow all by themselves, becoming larger and larger positions without my hand. It’s a wonderful thing. 🙂

    I hear you there on WFM and SBUX. Will they be the next blue chips? Tough to say, but a compelling case could be made there. Especially for SBUX. Great business model. I hope to invest myself at some point here. WFM has a great store. Retailing is historically brutal, however.

    Thanks for dropping by and sharing. Always good to chat.

    Best wishes.

  58. helen7777,

    I’m glad you found value in the article.

    I don’t necessarily think DIS is a fits-all stock. The low yield and annual payout are drawbacks for many, no doubt about it. But I’m interested in investing in great businesses that pay and regularly increase dividends. DIS fits that bill pretty nicely. If you’re looking for an excellent company with seemingly nothing really that wrong with it right now, it’s hard to find a better model than Disney.

    I’m in a fortunate position to where I can branch out a bit in regards to low-yield stocks. If I were just starting out, it’d be a tougher case to make.

    Thanks for dropping by!

    Take care.

  59. Tom,

    That’s not a bad list there. Can’t say I completely disagree. And I do have SBUX on the watch list. I hope to own a piece at some point in time here. 🙂

    Take care!

  60. Brian,

    I hear you there. DIS hasn’t really offered much of any dips over the last few years. Could go anywhere in the short term, though some big projects coming out over the next couple of years makes it seem unlikely they’ll dip much over the foreseeable future. Either way, I think this is a rather compelling long-term investment.

    BBL is a huge value. Obviously, very different company, stock, and value than DIS. I’ve had my fill of BBL, but I wouldn’t turn down the chance to buy some today. Those resources aren’t going anywhere and neither is the world’s need for them over the long haul.

    Too may options is never a bad place to be. 🙂

    Appreciate the kind words. I’m glad you’re on the path. I’m walking alongside you.

    Best wishes.

  61. I noticed that Buffet sold his shares of John Deere. Are you planning on keeping yours?

    Just wondering.

  62. Selling involves transaction costs including the 15% tax on capital gains, which is why I thought it was better to hold Sysco despite it being somewhat overvalued. I find Disney and Sysco both overvalued at the current price, albeit for different reasons.

    Just looking at one year earnings is meaningless, because earnings are cyclical. Most experts, including Graham and Shiller, recommend calculating PE using earnings averaged over past 10 years. By that measure, Disney currently sports a high CAPE over 30.

    Perhaps 1998 is not the best comparison, but my point is that a great run is more often than not followed by poor returns. Past performance do not guarantee future returns. In fact, reversion to the mean is almost assured. We can often be myopic in projecting great EPS growth over past 10 years into the next 10 years, and, conversely, write a company off just because its growth has been stagnant over the recent years. But as Horace said, many shall be restored that now are fallen, and many shall fall that now are in honor.

    Moreover, a smaller Disney in 1998 had far greater growth potential than a bigger Disney now, which is why its PE was higher. It is much easier to turn 1B into 2B, than to turn 10B into 20B. While Disney did go on after 1998 to post excellent EPS growth, it was less than what the market had priced into the stock, which is why the stock price remained stagnant for the decade after. Trees don’t grow to the sky; neither do companies.

    That said, I don’t disagree with your decision to buy Disney as a long term investment. The valuation is high but not ridiculously so (like Amazon for example). The total return should be satisfactory in 20+ years.

  63. I like the buy, great minds think alike as I also just purchased DIS on Monday. I think this is a decision we will both be very happy about in 10 years (also with Visa which I own). Having three kids DIS is very relevant in my life, especially on the pocketbook, so I figured I might as well make a profit on the money I am giving them.

  64. Nicola,

    Star Wars is indeed very exciting. Even the last three movies, which weren’t really all that spectacular, did incredibly well. If these next three are closer in feel, character development, and storytelling to the first trilogy, well…look out. 🙂

    Thanks for dropping by!

    Cheers.

  65. From a purely financial standpoint, I think you might be getting away from the dividend emphasis with this purchase. But I also admit I hate Disney. They put all kinds of unwholesome subliminal crap in their films. There are plenty of videos on YouTube that show this.

  66. Nice buy I like dis a lot. Have yet to find the right opportunity to buy tho. My most recent purchase was ECL the day after the OPEC announcement, got in at around $105. Two days later BAM they gave me a 20% raise. I’ll take it.

  67. Difu Wu,

    “it was better to hold Sysco despite it being somewhat overvalued”

    I guess I’m still just confused. Disney is priced for perfection at 22 times earnings and growing at more than 14% over a decade. Sysco is somewhat overvalued at 25 times earnings while not growing at all. Again, no offense, but I find your reasoning inconsistent.

    “Just looking at one year earnings is meaningless, because earnings are cyclical.”

    Agreed. Which is why I use 10 years of earnings in my analysis. But valuation is a “here and now” type of thing. It’s the price you’re paying now for all the future earnings and dividends, discounted back to today.

    Which leads me to…

    “Moreover, a smaller Disney in 1998 had far greater growth potential than a bigger Disney now, which is why its PE was higher. It is much easier to turn 1B into 2B, than to turn 10B into 20B.”

    Right. On the face of it, it’s easier to turn $1 billion into $2 billion than it is $10 billion into $20 billion. Less in absolute terms, even while the percentage is the same. Understood. But you have to factor in growth rates as well.

    Using Sysco and Disney:

    Sysco’s net income was $961 million in 2005. It was $932 million in 2014.

    Disney’s net income was $2.553 billion in 2005. It was $7.501 billion in 2014.

    Sysco came from a lower base, yet went nowhere. Disney started from a higher base and grew substantially faster. Just assuming a smaller company will grow faster because the absolute numbers are smaller is silly. Furthermore, assuming that the Disney of 1998 deserved a higher multiple than the Disney of today is also silly. It just wasn’t as high-quality of a company. You’re trying to rationalize the irrational exuberance of the late 90s with a small vs. large debate.

    “While Disney did go on after 1998 to post excellent EPS growth, it was less than what the market had priced into the stock, which is why the stock price remained stagnant for the decade after.”

    Again, DIS’s valuation was almost twice as high as today, even though the company wasn’t growing as fast. Companies don’t grow in the sky, but businesses aren’t operated in a vacuum. Stocks can revert to a mean, especially when they’re valued too high (like DIS was in 1998). But companies don’t automatically revert to a mean. You seem to be confusing stocks and companies. From what I can see, the company grew at a faster rate over the last 10 years than it did the period from 1998 to 2008. So the valuation is half today what it was back then, yet it’s growing faster.

    I don’t mean to criticize you, but I hope you take my comment to heart. Comparing a company that was growing at a slower rate with a P/E ratio twice as high is just not an apples-to-apples comparison. I think you know that, yet you’re trying to confuse the issue.

    Cheers.

  68. p guitierrez,

    Haha. I hear you there. As a shareholder, I appreciate you spending the money on Disney products, as I’m sure your children do. 🙂

    I agree with you that in 10 years time, the odds are very good that we’ll be happy with our purchase. The company appears to be firing on all cylinders right now.

    Thanks for sharing!

    Best wishes.

  69. mysticaltiger,

    Right. Disney isn’t a prototypical dividend growth stock. I mentioned that. But as I’ve stated before, I’m fortunate to be able to branch out an target those companies that offer substantial total return potential at the expense of some income today. Visa is another example. I’ll continue to intertwine these types of companies with more traditional dividend growth stocks that offer more current income. But I’m on pace for FI by 40, and these types of companies are very exciting investments.

    Take care!

  70. took2summit,

    I like ECL a lot. Great company. Haven’t been able to make a stab at it, but it is on my radar. 30 times earnings is a bit tough to swallow, and I’d agree with Morningstar on the valuation. But it’s a solid business. Hope to join you at some point. 🙂

    Cheers!

  71. DM,

    You can’t project past growth into the future. Just because Disney’s had been growing fast in the past 10 years doesn’t mean that it will grow fast for the next 10. Same with Sysco. Just because its growth had been stagnant over the past 10 years doesn’t mean it will remain so. Reversion to the mean applies not only to stock prices, but to companies also, as demonstrated in the 100+ years of corporate American history.

  72. Difu Wu,

    Valuing a company involves projecting future growth. Generally speaking, using past growth is about as good a place to start as any.

    I think we’ll have to agree to disagree here.

    Cheers.

  73. Henry,

    Quite the opposite, actually. This may very well be my only purchase this month. But that’s okay. I’m really quite pleased with my stock purchases over the last 12 months, all in all. Some were better than others, but I feel really good about the way the Fund is entering 2015. 🙂

    Thanks for dropping by!

    Best wishes.

  74. I’ve been long Disney since about $51. They make smart acquisitions and really know how to capitalize on their franchises. The 34% dividend increase proves that they are committed to returning money to shareholders.

    They *stole* Marvel by only paying $4 billion and change. Since that acquisition, Marvel movies have combined at the box office for more than the acquisition price. Add in the licensing revenue, home video revenue, etc … and Bob Iger proves why he’s earning his paycheck.

  75. The mouse in the house has more bounce to the ounce! (Just saw that on Stocktwits) Lol.

    I like it…almost pulled the trigger when I saw it at $81 in October, doh!

    Cheers!

  76. DM,
    Nice pickup,looked @ DIS a while back and should have pulled the trigger. However, there’s a lot lower fruit on the trees these days. I pulled the trigger on BBL this morning to round out my position there. The super majors look good here also. Definetly keeping some powder dry for future buys. Any thoughts on this market?

    All the best,

  77. Stugats,

    Haha. That’s a good one there. I think the force is strong with Disney. 🙂

    $81 would have been a solid price. Not just for the last few months, but for the long-term. I missed it too, though. Live and learn.

    Cheers!

  78. j-harr,

    I agree that BBL is low-hanging fruit here. I’m all loaded up myself, but if I were looking for a compelling value that would be it.

    Not sure about some of the supermajors. Seems to me like they could fall a lot further if you look at where they’ve traded when oil was low. I wouldn’t mind adding to some, but the prices would have to drop well below my cost basis. My cost basis in CVX, for instance, is near $100. So I might think of adding near $90. I bought XOM not all that long ago below where it’s at now, and oil was much higher. Regardless, I’m a happy camper.

    Take care!

  79. No worries, I wasn’t saying DIS is a bad investment decision, I agree with the buy 100% as I think their poised for earnings growth (and resulting share price growth). As I noted earlier, I own it in a growth portfolio.

    What I was saying was I just don’t think it’s a dividend growth investment at all. Rather, it’s a growth investment. Putting it in a dividend growth portfolio is somewhat disingenuous IMHO as you’re really buying the future earnings of the company instead of future dividends.

    You said yourself that it only added $17.25 annually to your dividend income, which represents less than 0.3% of your annual dividend income. On this $17.25, you will owe taxes and fees so really you’re walking away with about $14 annually for your $1400 investment. That’s not beating inflation by any measure.

    You mention diversification as a driver, but without adding to your dividend income in a material fashion, you’re not really any closer to your goal of living off of dividends. There are plenty of municipal bonds that can beat your DIS yield and do it tax free. But alas, people probably wouldn’t read articles about them as much.

    It just seems to me that some of your recent buys are moving from a purely dividend growth investment strategy into more of a growth strategy. That’s all I was getting at with my statement. I like your writing style and love your investment story. Perhaps there’s a “www.growthmantra.com” blog in the future?

  80. Beautiful Jason !

    Disney has been on my wathclist since only 2 months, and I must admit you incite me to pull the trigger. I think it is one of the best managed company worldwide. We will be co-owner since next monday. Meanwhile, wish you a good weekend.

    Aspenhawk

  81. Etraitor,

    It appears to me that you don’t understand this strategy, growth, inflation, or some mix of them.

    “That’s not beating inflation by any measure.”

    Again, inflation is a measure of growth. You’re simply looking at Disney’s yield of 1.2% and comparing that to inflation. That’s really the incorrect way to go about it. You’d have to compare the total returns of DIS against inflation if you’re comparing your investment in the company against inflation. Dividend growth investing, however, aims to increase income over time over and above the rate of inflation. And DIS’s 30%+ growth trumps inflation’s 2% by a wide measure. Perhaps you don’t understand that? That $17.25 will become $20, then $25, then $35, then $40 over time. Meanwhile, inflation will not give rise to something costing $17.25 nearly as fast. That increase in purchasing power over time builds wealth and income as it’s reinvested, while DIS’s stock price also rises.

    Municipal bonds don’t offer income that grows. You’re speaking about inflation here, yet bring up an investment that doesn’t beat inflation at all. Your initial yield in a muni bond will be higher than 1.2% for sure, but the real purchasing power that income provides decreases over time. Municipal bonds will return you the coupon over the investment period and that’s it. DIS provides you the yield plus the growth in income and the business. DIS has returned more than 250% over the last decade. What was inflation over that period? What did municipal bonds return?

    It’s not about growth or income. It’s about both. I hope that all of my holdings substantially increase in value over long periods of time. Of course, I hope that happens after I’m done building up positions for the most part, like KMI.

    I would recommend some reading on this subject. Best of luck.

    Cheers!

  82. Aspenhawk,

    Sounds good. Would love to have you as a fellow shareholder! 🙂

    I agree with you on DIS’s management. Iger has done a really great job here.

    Have a great weekend!

    Best regards.

  83. Scott,

    Wanna trade cost basis?? Pretty please? 🙂

    The Marvel acquisition appears incredibly intelligent, though Disney has really ran with it. And that’s the benefit of their multiple platforms and cross-promotion. They’ve got such a unique business model in that regard. I’m willing to bet they stole Lucasfilm as well, which was really underutilized from a monetization perspective. Things are looking up here!

    Thanks for dropping by.

    Take care.

  84. DLee,

    BP offers a high degree of risk/reward.

    T will probably provide 8% annual returns, if their yield and dividend growth is any proxy. The DTV acquisition, if approved, gives them a solid foothold in Latin America, additional cross-promotion/bundling opportunities, and additional subscriber growth. So that could offer greater potential upside. T appears roughly fairly valued to me, if 8% is the hurdle rate. I typically aim for 10% returns, so T’s a difficult stock to add to for me. But the time value of money and high yield makes up for some of that.

    Cheers!

  85. Well, I will be adding some steam to your investment in a few weeks When We Go To Disney. I was actually just on the Disney site doing some last minute changes when I noticed this post. Disney is truly an amazing company. Good for you.

    Keep cranking,

    Robert the DividendDreamer

  86. IMO, this is a very over valued stock right now. I guess you have to pay a premium because of the dividend growth you expecting to have there. You regret you haven’t bought it sooner, that’s ok. I think dividends can go up by a bigger rate than inflation, and that is want you have to look. But, I think total return will not be great.

    Oh! And remember, you now own a piece of world of magic!…

  87. DM,

    Thanks for the reply, I think oil has more upside than downside from here. production will slow from here most definitely on rising costs???? I look to add value only here, as to my purchase this morning. BP looking very interesting from a value standpoint.??

    Thanks,

  88. Nice buy! I bought Disney in 2013 for about $62.00/share. I love not just the diversification, but the wide range of EXCELLENT products. From the ever-popular theme parks to the Marvel Superheros to the animated moves to, not but not least, the Star Wars material which is absolutely taking off. While I wish the dividend payment was higher, I absolutely love DIS and plan to hold it more or less forever.

  89. Love the company! Not a big fan of its valuation, but what can you do? Well worth it. And as someone who lived in Central Florida for a decade, DIS is not going anywhere at all.

  90. Long DIS. Added 50% to my position 4 weeks ago under $90. Love the long term outlook. Let’s hope Mickey treats us well!

  91. Great pick, from one shareholder to another. I’ve been invested in DIS for a little over 30 days and only because a buddy of mine suggested I give them a look. I was surprised by all they’ve been up to these recent years. I really like this part of my portfolio and know it will serve me well throughout my life. Glad you bought yourself some shares. Good job!

    – HMB

  92. Great purchase! Disney is in my son’s dividend portfolio as a very long term hold and I’m planning to add Disney in our dividend portfolio too.

  93. http://youtu.be/zLYECIjmnQs?t=40s Imagine if this didn’t happen. I think you can not go wrong holding disney, especially for the long term. A lot of families try to take their kids to Disney from all over North America. On top of that all the movies they and everything else besides the theme parks, will reward you for years to come as a shareholder.

  94. Nuno,

    I own a piece of the Magic Kingdom. Feels pretty good. 🙂

    I obviously disagree that DIS is very overvalued. Morningstar’s estimate was the most conservative of them all, which would indicate roughly fair value right now. But valuation is also subjective.

    Thanks for dropping by!

    Best wishes.

  95. TGGD,

    I’ll trade you cost basis. 🙂

    Great buy there. I can’t imagine why you’d ever want to sell, as long as Disney’s management continues to do the right things. Thus far, shareholders should be very, very happy with the way this company has been run over the last ten years.

    Certainly glad to be a fellow shareholder. Better late than never.

    Best wishes.

  96. KeithX,

    Nice move. I think we’ll both be very, very happy. I’m hoping to add to my position here and there and eventually build this into a core holding for the portfolio.

    Thanks for sharing!

    Best regards.

  97. DD,

    I went to Epcot a few years ago. It was nuts. I mean nuts. And it was during the summer. Unbelievable. That place is busy all the time. Upcoming projects are exciting, and I imagine Frozen will be a great long-term franchise as well. I recall reading the dolls were outselling Barbie. Good stuff. 🙂

    Take care!

  98. Tawcan,

    Thanks!

    I don’t think DIS is particularly cheap here, but it’s one of the highest-quality companies out there, in my view. Plus, it’s one of the few companies without any major near-term problems. There are risks like any other company, but it’s firing on all cylinders.

    Have a great weekend. 🙂

    Cheers.

  99. HMB,

    We’re on the same page then, aren’t we? 🙂

    I agree with you on being surprised at just how successfully acquisitive they’ve been. Major acquisitions, but great deals and great franchises. The Disney of 10 years from now will be different than even the one we know today. They’ve got so many exciting things going on. I can’t wait to see how the Star Wars movies are received, but I imagine the fanfare is going to be through the roof. Very exciting as both a fan and a shareholder!

    Best wishes.

  100. IP,

    Nothing like failure to motivate one to do even better and succeed. It was my firing back in 2009 that led me to move to Florida and seek out a new way of life.

    I imagine this should be a very solid long-term hold. It appears to be one of the widest-moat companies out there, in my humble opinion. The yield leaves a bit to be desired, but a few more years of dividend raises in the 30% range and I’ll be very happy with the income.

    Thanks for dropping by and sharing the video. 🙂

    Cheers!

  101. solid buy Jason. Sounds to me like you got yourself one of the “best of the best”
    I’ll definitely be keeping these guys on the radar!
    thanks for sharing pal

    Ace

  102. I think Disney is just one of those stocks that you buy whenever. There’s hardly a dip (although mid-Oct would have been nice; and ironically we were at DisneyLand that day!), so it’s just average out the cost. The annual dividend is a tad awkward, but it is what it is I guess.

    It is always on the watch list.

  103. Ace,

    Thanks, bud. It’s a pretty high-quality company. I’m glad to add a media company of this caliber to the portfolio. It diversifies things nicely, and it could be one of the faster growers. We’ll see if I have some opportunities to add over the coming year. 🙂

    Congrats on your BMO buy!

    Cheers.

  104. DH,

    I agree. The annual dividend is a bit of a drawback. I wonder if they’ll ever change that.

    Disney has been almost straight up over the last few years. I RARELY buy stocks after a performance like that, but this is one of those few high-quality exceptions. I’m a value hunter, but I’m paying a fair price for a great company here. We’ll see how it turns out.

    Have a great weekend!

    Best wishes.

  105. DM,

    I was just thinking that BP might be a good buy since oil is down. I imagine the oil stocks would be a good buy at this time, even if it’s just short term. Do you feel like BP and BBL will rebound in the future? At 24 years old, I was thinking maybe it’s okay for some higher risk/higher reward since I have a longer timeline…should that change my purchase choices? Thanks!

  106. DLee,

    What I would do if I were you is take a look at a long-term oil price chart. Then compare those prices to the prices of some major oil companies. What was the price of Chevron the last time oil was this price?

    As far as BBL goes, I think it’ll be fine. It’s diversified pretty strongly across its resource base, though iron ore is a big division. Iron ore isn’t going anywhere, but demand will fluctuate. Right now, demand is down. I suspect it’ll be back down the road as there are many well-populated countries (like India) that still require massive building out. It’s a long-term play, however. If you’re not ready to profit from BBL for the next decade or two, then it might not be a great investment. All of these commodity plays are very volatile, so that’s something to be mindful of. Looking at a long-term oil price chart will show you that the recent volatility is really nothing.

    I hope that helps!

    Best regards.

  107. DM,
    I started buying DIS a few months ago through dollar cost averaging. My thinking… This is a great company I need to own for the long run. Many times I’ve looked at it over the last decade, it was too expensive based on my set criteria, but in hindsight it wasn’t expensive considering future growth. A premium must be paid for a premium company, which Disney undoubtably is.

    And that ridiculous dividend increase! and Frozen is a hige new franchise. Love this buy.
    -RBD

  108. RBD,

    “My thinking… This is a great company I need to own for the long run.”

    Like words out of my own mouth.

    I admire Buffett and Yacktman a lot, and both have long been fans of quality investments in media and entertainment. I’ve noticed that my own portfolio has lacked any exposure there whatsoever, but I’m changing that now. 🙂

    Glad to be a fellow shareholder. Have a great weekend!

    Best wishes.

  109. Hi DM, I do think that DIS is the best of the best when it comes to equity ownership in a business. And even tho’ it costs a fortune for a family of 4 to go to Disneyland, they keep packing in the crowds. I am however going to pass on this buy. Why? There are too many super high quality companies already paying a 3% or higher dividend and raising every year. So I do not want to wait for DIS to raise it up to what I can already get with other great stocks. I agree with you about oil stocks; just look at an oil chart as you say. Also BBL is a great big company that will fluctuate but in the meantime it is paying a great dividend which I am reinvesting into more shares. Best, Dan

  110. dann,

    I hear you there. I agree that DIS, due its low yield and annual payout schedule, is not for everyone. I feel fortunate that I’m in a position to where I’m not necessarily bound by certain yield ranges anymore now that I’ve been able to build a snowball with some momentum behind it, but even then I’m not going to fill the rest of the portfolio with low-yielding stocks like DIS the rest of the way. But I think there’s some space for DIS, along with names like SBUX, NKE, COST, etc.

    But if I were just starting out or were perhaps older and in need of more income now, I’d stick with those stocks yielding 3%+ strictly. Though, it is nice to know that DIS’s dividend growth should yield very nice income within about a decade, if they can come anywhere near that 20% pace.

    Thanks for stopping by!

    Best wishes.

  111. If I were to buy a low yield stock it would definitely be SBUX. Starbucks is a place where people can spend an entire afternoon, evening, morning — meet new people, chat, enjoy — and all for a few dollars. It is one of the very few places you get that for the price of a cup of coffee. In fact I think I just talked myself into owning a piece of SBUX. So on Monday, maybe 50 shares >:)))

  112. Hi Jason,

    Well done on another purchase, I’ve picked up a few more Shell during the past week……The “Uber frugality” is proving more difficult as the month moves along, already used Decembers petrol allowance and quitting the ciggies is now a big struggle, I’ve moved from shop bought cigarettes to roll your own, so should still be a saving over normal costs, I’m still confident of sub 200 Dollars but 150 looks unobtainable at this stage.

    Cheers,

    Dave….

  113. Hi Jason,
    Just last week a colleague told he went for a few days to Disney Land Paris with his wife and children. He explained me how crowded it was, what a wonderful new attractions they had built and especially how very good they are at entertaining people and making visitors feel important. E.g. even in the waiting queues they entertain people so the waiting does not feel as wasting time…
    Upon that note I felt that I needed to be a partial owner of Disney. But although a wonderful I was indeed rejected by the high P/E, the low yield and the fact that for the last years the prices has sky rocked. I decided to pass.

    After reading your post I might however reconsider. Indeed, as you point out, I need to look at this investment more in the way I look at V, more long term than short term.
    Thanks for shedding a new light on it.

  114. Hi Jason,
    how did you get the value of $117.06? It seems resonably high considering a 10% of discount factor.
    Alex

  115. Hi Jason!

    Do you compute the CAGR numbers yourself from Morningstar data or are the CAGR numbers handily served somewhere on any page for us to read them?

    Thanks in advance and have a nice weekend!

  116. Jos,

    I know what you mean. You can see by my purchases over the years that I almost never buy a stock after a run like this, especially over the last year. Visa has been one of the rare exceptions. Now add Disney to the list. But sometimes you have to pay up for quality. And sometimes winners keep winning. It’s great to pick value stocks that have a huge margin of safety, but I’d also argue that DIS isn’t all that expensive here. The P/E ratio is lower than many popular consumer stocks – KO, PG, PEP – but the potential is just as great, if not better. We’ll see how it goes. 🙂

    Thanks for sharing that story. I love happy customers!

    Best wishes.

  117. Alex,

    I’m not sure I understand your question. You can see the DDM analysis figures in the article. I used a 10% discount rate (my anticipated/desired rate of return) with a two-stage dividend growth model. Some may argue the terminal rate is aggressive, but I think it’s reasonable through a combination of core organic growth, acquisitions, and buybacks over a long period of time. That said, valuations were provided from Morningstar and S&P Capital IQ for comparison purposes. And it appears that DIS is at least fairly valued here, which I think is reasonable for a high-quality company in this market.

    I hope that helps.

    Best wishes!

  118. I think Disney is a great company. It has been in my watch list since before I became dividend-centric investor. I have not bought it because one of the largest holdings in my portfolio is Comcast, one of the only stocks that remains in my portfolio from my pre-dividend growth investing days. I would not be opposed to owning both even though they are direct competitors. I just really like Comcast’s stranglehold in the cable TV space. I think both are great companies…….

  119. DM,

    “Along with a few other names I have in mind.” You can’t drop that nugget and not share… eventually 🙂

    I’m not sure what to do about V. I still want in, but my gut turns at the thought of paying 25 percent more than what it was 60 days ago. First world problems 🙂

    I feel somewhat fortunate to have bought Disney at $73xx, and I’d say it’s easily in my top five to add to on any broad market retreat that sends everything lower.

    Also keep in mind that The Force Awakens is the first of SIX Star Wars films currently in various stages of development, and some very talented directors and writers are working on the others right now. One per year arrives from 2015 through 2020. You can bet more after that if the money flows.

    My concerns lie in their television business (ABC/ABC Family/ESPN channels) and how they weather the cable cutting storm as it intensifies (they’re definitely being proactive in that respect), and if the massive theme park investment in China pays off. I do love the fact that Disney is “first” there and the potential for success is ripe, especially leveraging Marvel and Lucasfilm alongside their core brand.

    Best,

    DWC

  120. Hi DM,

    Very interesting purchase! I particularly never looked at Disney as a potential investment target, but if I recall correctly Warren Buffet did own it at some point. In fact, if he had kept it, he would have made around $12B.

    In my case I regret not purchasing Visa back in October, but I am tempted to purchase it now, even after this valuation jump. Based on my criteria, it was offering really good value and now it’s around fair-price but there aren’t that many opportunities at this point, so I might go for it.

    Best Wishes and keep rolling 🙂
    Dividend Venture

  121. Never been envious when someone buys a stock that I like but, Disney is something I wanted to get my hands on for years but never pulled the trigger. Well done with that purchase it’s a buy and hold if there ever was one.

  122. BCS,

    I don’t see why one couldn’t own both. Comcast certainly has some competing assets on the content side with NBCUniversal, but Comcast is a lot more heavily invested/tilted toward media delivery through its cable and broadband assets. So I think one could own both for different plays on media.

    Best of luck with Comcast! 🙂

    Cheers.

  123. DWC,

    V’s a tough call. I’m personally not interested in it right now at this price and valuation. I’m not saying that’s the right call, but it just seems a bit rich, even for its potential. There appears to be very little margin of safety, even if one doesn’t seem necessary.

    The Star Wars movies are going to be absolute cash cows. I say that as a fan, intelligent observer, and shareholder. The fan base is incredibly loyal, and these films will be like printing money. You’ve got the actual movies, the licensing, home video, cross-promotion, etc. It goes on and on. I’m very, very excited about that. And who knows how many Frozen flicks we’ll get. 🙂

    I’m actually not all that concerned about their broadcast assets. ABC is a broadcast network, so it’s not dependent on cable subscriptions. Free HDTV, baby. And ESPN is a monster. Check it out:

    http://www.forbes.com/sites/kurtbadenhausen/2014/04/29/the-value-of-espn-surpasses-50-billion/

    I hope to build DIS up to 100 shares over the next year or so, depending on capital and valuation. 🙂

    Best regards!

  124. DV,

    He was heavily involved with Capital Cities/ABC, which garnered him cash and some DIS shares. He sold. I don’t know how that all worked out for him, as far as opportunity cost. But it’s obviously hard to criticize the guy. That said, DIS would have been a fantastic holding for Berkshire.

    I think V offers one of the best growth profiles of any large company out there, though I’m content with the measly 5 shares I own. I hope for either a broader market pullback or some kind of “I hate V this month” sentiment from investors at some point. But if it keeps rolling as a business, we might not get another opportunity. We’ll see. So many stocks, so little capital.

    Thanks for dropping by!

    Best wishes.

  125. Sunny,

    Ha! I didn’t mean to bring on any envy. 🙂

    DIS offers a lot to like. Seems to be a very high-quality company, from what I can see. The low yield is a drawback, as is the annual payout. Not my favorite stock in that regard, but definitely one of my favorite companies. We’ll see how it plays out, but I can’t imagine someone buying DIS right now would be unhappy 10 years later.

    Hope you’re having a great weekend! Thanks for stopping by and commenting.

    Best regards.

  126. Here’s to hoping $DIS does a good job with the Star Wars series. Those are some pretty big shoes to fill

  127. Hi Jason,

    First off I want to thank you for all the excellent analysis you have given to us the past four years. I have enjoyed the education and grown richer because of your efforts and my family is eternally grateful!

    This recent post has got me thinking.

    My emotional qualitative side loves Disney. As a father of three I have experienced first hand the magical power of this company. Parents feel pressured to take their children on the expensive pilgrimage due to the excellent marketing of all their efforts. The trip dies not disappoint. I expect this will continue.

    The recent price run is amazing and definitely reminds me of V which I too missed out on. It seems to scream “Buy!”.

    But you have taught me to look at all the fundamentals and compare this opportunity to other options available.

    So I decided to look back at the dividend history the last thirty years. During that time we gave had inflation, recession, wars, blah, blah…

    Disney could be purchased in 1984 for $1.50 split adjusted and has grown to 93. During that time it has paid out about $7 in dividends per share. JNJ could have been purchased for $2 and has grown to about $100ish and has paid out about $28.

    For the investor looking for income to retire early it seems JNJ has paid 4 times as much income but the total return has been fairly close at around 15% CAG. Not that I expect everything to go exactly the same…but it’s what we have to go by. In fact as companies mature I think it may be harder for them to maintain the growth for several reasons….

    Here’s is my question for you and your readers:

    Why would Disney want to change its historical pattern of dividend payments to the suggested 7% long term growth? Doesn’t that decrease flexibility for the corporation? What motivates them to do that?

    Thanks
    Chris

  128. Steve,

    Definitely. I think J.J. was a great pick for the first movie, but it’ll be difficult to stretch that success out over the course of many movies. I’m hoping both as a fan and a shareholder that they’re able to figure it out. 🙂

    Thanks for dropping by.

    Take care!

  129. Chris,

    “Why would Disney want to change its historical pattern of dividend payments to the suggested 7% long term growth? Doesn’t that decrease flexibility for the corporation? What motivates them to do that?”

    That’s a good question. My take on it is this: Every publicly traded company is owned by its shareholders. So a company is generally bound by its fiduciary duty to serve its shareholders in the best way possible. Human nature sometimes gets in the way of this, but that’s the way it should be done. You could make the case that the strong growth in the business over the last decade or so has allowed the company to live up to that duty by handing out more cash to shareholders. But I think your question could be directed toward any other company out there. Or you could ask why a company would pay a dividend at all? Doesn’t that reduce flexibility? And, of course, I’ve already answered these questions at length before.

    Disney doesn’t have the kind of longstanding dividend track record of a company like Johnson & Johnson, which is part of what makes JNJ (and companies like it) so special. But you’re investing for where a company has yet to go, not for where they’ve already been. So I suppose an investor buying DIS today is making a bet that the recent dividend increases are a taste of the things to come. Disney can obviously continue to grow their dividend at a pretty attractive rate while also growing the business due to the combination of a low payout ratio and growth in the underlying business. Whether or not that happens of course is up in the air, which is true really for any company. But I’d be willing to bet that the Disney of today, with all of its recent acquisitions that builds upon the core business, should be able to grow its dividend at a faster rate moving forward.

    I hope that helps!

    Best regards.

  130. Hey DM-

    Do you know of any site that allows you to gift 3-4 stocks to friend or family? I would like to start gifting stocks of quality companies to my nieces and nephews instead of buying them gifts for their birthdays.

  131. denver,

    I did a search for this and couldn’t really come up with anything. It looks like there are a number of sites out there that allow you to gift a certificate that’s framed and everything, but you pay a pretty big premium for it. Looks like a great memento, but probably not a great way to build wealth for someone. What about just opening an account for someone in their name and funding it yourself? You’d have to work out the taxes for them, but that’s something to consider.

    Cheers!

  132. You wrote:

    >>DIS has returned more than 250% over the last decade. What was inflation over that period? What did municipal bonds return?

    Disney share price has risen more than 250%, they have not “returned” dividends anywhere near that value. I’ve been holding DIS for about 4 years now and have experienced some substantial UNrealized gains. The only way to realize those gains is to sell, which is NOT a dividend growth strategy.

    It’s no big deal, you bought a stock and hope it appreciates. It’s a solid strategy, it’s just not a “dividend mantra” strategy anymore. That’s all, you’re getting away from your roots.

  133. Good investment, here, Jason — I like that you’re recognizing value in the corporation I work for 🙂

    One day-after-Christmas a few years ago, we visited Disneyland and were involved in a human traffic jam near Pirates of the Caribbean. Took us 10 minutes to progress about 100 yards. I leaned over to my wife and said, “Look at the bright side — I work for this corporation…”

    Cheers
    FerdiS

  134. Oil and gas shares still under pressure. I’m looking to initiate a position in KMI this week.

  135. FerdiS,

    I didn’t know you worked for Disney. Very nice! 🙂

    My significant other’s ex-husband also works for a restaurant company inside Disney. He thought it would slow down when the financial crisis hit, but they never skipped a beat. The company is a juggernaut.

    Cheers!

  136. ThomasDV,

    The pipelines are a smart way to play it. Kinder Morgan has some direct exposure to O&G, but the majority of their business is tied to the pipelines. I’m pretty much maxed out KMI myself, but I think there’s still value here. The dividend growth projections are mighty impressive.

    Cheers!

  137. Hey Dividend Mantra,

    DIS looks like a pretty good buy…I am definitely taking a closer look.

    I’m rather new to this whole thing & wanted to ask you more generally about your freedom fund contingency plan. Like what if there is some black swan event and the whole market tanks for a long period of time. Wouldn’t that mess up your plan? Would you have to then get supplemental income? From what I am seeing you say yourself that you are cutting things close when you retire at 40 – that you won’t have a huge dividend income coming in at that point.

    Just a question, you seem to have considered most things very well, so just wondering if that had been considered as well.

    Thanks

  138. dzogen,

    Stock prices and my dividend income have little to do with one another, other than when I buy stocks. Cheaper prices means higher yields, so cheaper stocks are obviously a welcome sight in that regard. As such, I’d love to see the market drop by 20% or 30%. The value of my Freedom Fund isn’t what is going to allow me to become financially independent. It’s the income that the companies I own a piece of provide me. And most of the stocks that I invest in have been through major economic calamities and kept right on paying/raising dividends.

    I can think of no greater example of a black swan event than the Great Recession/financial crisis. Go back and see how many of the stocks I’m invested in cut their dividends in 2008 or 2009. You might be surprised.

    Best regards.

  139. DM,
    Really NOV under $64.00 more than enough cash flow to cover the div! Seems kind of silly now, we’ve seen some pretty good lows in the energy patch so far. Was that compitilation on some today???????? CVX, BP, NOV, BBL, what’s your thoughts?

    Thanks,

  140. j-harr,

    Yeah, energy is historically pretty volatile. I expect more of the same for a while, especially with oil being so low. Wouldn’t be surprised to see of of the supermajors lower. We’ll see! 🙂

    Take care.

  141. Another investment! good job Jason! The P/E ration is a bit high for me but my portfolio has less companies in it and therefor there are still more pearls in the sea for me then there are for you! The value you project though offers a massive profit range for the Disney stock and even got me interested and I will be doing some research into Disney. It’s easy to understand how they earn their money and therefor a stock I would consider. Great article! Keep up the good work!

  142. Dm,

    Could be a great time to build positions well at these lows for the long term. If we see supply taken off line oil will jump. Mr. Market will eventually settle this!

  143. DDI,

    Disney offers a lot to like. I agree it’s no steal here, but I think it’s at least fairly priced. And I’m always okay with paying a fair price for an excellent business. And Disney appears to be an excellent business. 🙂

    Thanks for dropping by!

    Cheers.

  144. Actually, I work for Pixar, which, as you know, is owned by Disney.

    You’re right about no slow down during and after the financial crisis. For many, going to Disneyland or DisneyWorld involves some family tradition/nostalgia aspect, which is not easily compromised on.

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  147. I just bought Disney at 118$; I was waiting but this stocks seems to not stop increasing in price. Even though it has a low yield, I am sure twenty years from now, I won’t be regreting having bought Disney; in fact, it is likely it proves itself a very good investment. So I bought not worrying too much if it is a bit overpriced right now.
    Thank you for your post, Jason, as always, wish you the best

  148. Investing wisely,

    Glad to be a fellow shareholder with you! 🙂

    Some thought I paid too much for DIS late last year, but I really don’t think so. I don’t think it’s overpriced even after the run, though I think it’s much closer to fair value now. It’s honestly one of my favorite companies, and certainly my favorite play on media/entertainment. Hopefully, I get an opportunity to double my position at some point here. Just a great business model here.

    Enjoy those dividends!

    Best regards.

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