With a year-to-date (YTD) loss of over 10%, Disney (DIS) is underperforming the S&P 500 Index ($SPX) this year. The stock has been a perennial underperformer, and even long-time CEO Bob Iger, who returned from retirement to lead the company again in November 2022, failed to deliver the magic the markets expected. Iger hung up his spurs last month, handing the baton to Josh D’Amaro, an insider who was formerly the chairman of Disney Experiences.
DIS stock is down nearly 45% over the last five years, while the S&P 500 Index gained nearly 65% over the period. Meanwhile, even as DIS stock fell under Iger’s over three-year stint, the company’s earnings rose over the period. It also increased its dividends, and since the reinstatement in late 2023, the payouts have increased by 1.5x.
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Given the disconnect between stock price and earnings/dividends, DIS stock trades at a forward price-to-earnings (P/E) multiple of 15.11x, which is below the average P/E of the S&P 500 Index, while its dividend yield of 1.5% is higher than the average index constituent. Given the relatively cheap valuations and higher dividend yield, Disney can find a place in portfolios of value investors looking for a dividend name that can also offer capital appreciation prospects, as we’ll explore in this article.
Disney is a media and entertainment powerhouse and is the literal “cradle to grave” business, offering something for practically every age group. The company has a presence in linear TV, streaming, movie production, and theme parks. These businesses are at different stages of evolution. For instance, the linear TV business is in a structural decline while the streaming segment is working on margin expansion after previously chasing growth at the expense of profitability. Theme parks remain the proverbial bread and butter for Disney, and the segment contributes the bulk to its operating profits.
The movie business might not be big enough to move the needle independently for Disney, but it is a key part of the flywheel, as box…
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