I have embarked on a fairly busy stock purchasing adventure over the past two months and thought I would be taking a breather for a few weeks. Recent market weakness has lured me in for another buy, though this one will be the last until I at the very least figure out what my tax obligation looks like.
Or maybe having enough cash on hand to make a new purchase was burning a hole in my pocket.
More likely my reasoning was an even mix of both.
This morning I watched the S&P 500 dip under 1985 this morning and a handful of stocks reach levels that put them within arm’s reach. One in particular I felt was primed for a 10% jump in price by year’s end from this morning’s levels so I pulled the trigger, despite the fact that I won’t see a single penny in dividends from it for another year.
I purchased 17 shares of Disney (DIS) for $90.19 a share, bringing my total number of shares to 67 and increasing my cost basis to $77.76 per share. My annual Disney dividend payment jumps to $77.05 at current levels, though I fully expect a double-digit percentage increase in Disney’s dividend payout to be announced next November or December following this past year’s 34% increase. That will in turn theoretically increase my next dividend payment from the House of Mouse somewhere north of $80 annually.
This purchase was made with an equal weight of risk and reward in mind. Disney’s upcoming motion picture slate is incredibly strong with Avengers: Age of Ultron coming in May and the return of Star Wars in December with additional annual installments for at least the next six years. Both of these big 2015 films should top $1 billion worldwide in gross revenue. Mixed in between is a second new Marvel film, Ant-Man, and Pixar’s first film in two years, Inside Out, which just ran a Super Bowl spot yesterday as its awareness campaign grows.
Disney should also see surges this year from its toy business with Frozen continuing to lead the way. Mattel bombed on its earnings report recently, and I feel as if some of their pain in the Barbie results comes from Frozen stealing the hearts of girls everywhere a year removed from its debut.
ESPN just recorded record cable ratings for each of the first three College Football Playoff matches. That segment of Disney’s business has the potential to put up record results for the fourth quarter.
The theme park business could see an uptick in revenue with lower gas prices and prospective visitors taking advantage of that to plan vacations. Also, lower gas prices will help the bottom line of Disney’s popular cruise ship business.
It’s widely expected that Disney’s Q4 earnings report tomorrow, February 3, will be lackluster in terms of growth due to the Frozen effect on earnings growth having passed. Yes, they had a big hit with Guardians of the Galaxy last summer, but Big Hero 6 barely did just over half the business that Frozen attracted in the same November release window with merchandise sales that aren’t even comparable. Growth will be slower year-over-year for sure, but I expect the outlook to be rosy with what’s coming down the pipe.
Ultimately I’d love to own 100 or more shares of Disney in my dividend growth portfolio and am two-thirds of the way there. The yield may not be sexy hovering around 1.25%, but there’s ample room for growth and a management team in place doing a great job of executing their plan to stimulate growth.
As an aside, I have reinvested dividends recently into PM, HRS and JNJ due to their respective recent slides.
I am long HRS, PM, JNJ and DIS. This article is for entertainment purposes only and not an advertisement or solicitation to purchase any of these securities.