Disney Increases Dividend by 33% Following Streaming Profit Milestone

By Richell Fredson  | Dec 05, 2024 Updated 10:49 a.m. ET

The Walt Disney Company announced a 33% increase in its dividend, reflecting the company’s confidence in its financial performance after achieving profitability in its streaming business for the first time. The decision underscores Disney’s commitment to delivering value to shareholders while balancing its growth in the competitive streaming landscape.

Streaming Success Drives Dividend Growth

Disney’s announcement comes on the heels of significant milestones in its streaming division, which includes Disney+, Hulu, and ESPN+. The company reported that its direct-to-consumer business turned profitable in the most recent quarter, a major achievement in an industry where profitability has often been elusive.

CEO Bob Iger stated:

“This dividend increase reflects our strong performance and strategic focus on creating long-term value for shareholders. Achieving profitability in our streaming business is a testament to the strength of our content, technology, and global reach.”

Dividend Details

The 33% increase raises Disney’s quarterly dividend from $0.30 per share to $0.40 per share. The enhanced payout will benefit shareholders starting in the next fiscal quarter, with the dividend applicable to investors holding shares as of the record date to be announced.

This marks a significant step toward Disney’s pre-pandemic dividend levels, which were suspended in 2020 to preserve cash during the COVID-19 crisis. The move signals the company’s financial recovery and robust cash flow generation.

Streaming Milestone Highlights

Disney’s direct-to-consumer segment achieved profitability earlier than many analysts expected, driven by:

• Subscriber Growth: Disney+ maintained a strong subscriber base globally, despite recent price increases in some markets.
• Ad-Supported Tier: The introduction of ad-supported subscription options has expanded the customer base while generating additional revenue.
• Cost Optimization: Streamlining content production and marketing expenses has helped improve margins.

Analysts highlight the importance of these factors in positioning Disney as a strong competitor against other streaming giants like Netflix and Amazon Prime Video.

Market Reaction

Following the dividend announcement, Disney’s stock (NYSE: DIS) rose by approximately 2% in after-hours trading. Investors welcomed the news as a sign of financial stability and management’s focus on shareholder returns.

Market analysts note that the dividend hike could attract income-focused investors, adding to Disney’s appeal as a long-term investment.

Balancing Growth and Returns

While the dividend increase is a positive signal for shareholders, Disney remains focused on investing in growth. Key initiatives include:

1. Expanding Content Offerings: Continued investment in original programming for Disney+, Hulu, and ESPN+ to maintain subscriber interest.
2. International Growth: Efforts to expand streaming services in emerging markets, particularly in Asia and Latin America.
3. Theme Parks and Experiences: Leveraging its parks and resorts to drive revenue growth alongside its streaming business.

Iger emphasized the company’s balanced approach, saying:

“We remain committed to rewarding our shareholders while continuing to invest in content and experiences that differentiate Disney and drive long-term growth.”

Despite the positive developments, Disney faces challenges, including increasing competition in the streaming market and potential regulatory scrutiny. Additionally, maintaining subscriber growth while managing content costs will require careful navigation.

Disney’s decision to boost its dividend by 33% highlights the company’s confidence in its financial trajectory, driven by the landmark profitability of its streaming business. With a clear focus on balancing shareholder returns and strategic investments, Disney aims to solidify its position as a global leader in entertainment. Investors and industry watchers alike will be closely monitoring the company’s next moves as it continues to evolve in the dynamic media landscape.