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Intelligent Speculator

The New Disney ($DIS), Opportunity?

November 05, 2012 | About:

Don’t get carried away. The $4B purchase of Lucas studio and its rights to Star Wars is not the reason why I’m suddenly interested in Disney. It doesn’t hurt because I do think that Disney is a perfect fit but let’s not kid ourselves, the impact of that acquisition on Disney’s bottom line will likely be very small and that is not the reason you’d be buying shares of Disney anyway.

Common Misconception About Disney

I know that we all think of Disney as the land of Mickey Mouse, Donald Duck, princesses, and all of the other characters that we have all learned to love in our childhoods and then rekindled with once we got our kids (I’m about to enter that phase haha). And yes, to an extent, Disney does still make money out of its tv shows and movies, its theme parks and everything else in the Disney empire.


That being said, Disney has been able to grow for decades thanks in part to acquisitions and in 1996, when it purchased ABC and a few other tv networks, I don’t think anyone could have imagined how big a part of that deal would become. No, not ABC, the national channel but rather ESPN, the sports specialized chain. Over the years, ESPN has been able to completely dominate the sports scene taking its dominance to all kinds of sports, as well as other mediums such as radio, internet, etc all around the world.

How Big Is ESPN?

In fact, ESPN contributed $18.7B in revenues last year which is nearly half of Disney’s $40.9B!! So yes, ESPN is by far the biggest portion of Disney with the theme parks lagging at $11.8B and film studios far behind at $6.3B. I’ve heard some say that Disney should spin off ESPN but I do think that they complement each other incredibly well. It’s important to understand how critical ESPN is though because when you’re looking at Disney, you should not imagine this traditional children centered

How Do ESPN’s Financials Look?

First, here is a look at the stock over the past decade:


Dividend Stock? Reasonably..

So yes, Disney has been able to increase its dividend in the past few years but it remains under 1.50%, which is probably enough to attract someone who considers dividend important (such as myself) but probably not enough to justify a spot in a dividend portfolio such as the USDP. Here

TickerNameCurrent Dividend Yield5 year Dividend Growth1 year Dividend Growth
DISWalt Disney Co/The1.214.1250

Strong Fundamental Numbers

TickerNameSales Growth (1 year)Sales Growth (5 year)EPS growth (5 year)P/E ratioP/E Next YearMargins growthPayout ratioReturn on EquityDebt to Capital Ratio
DISWalt Disney Co/The7.444.4313.8116.7214.263.715.63140.17
I am personally very impressed with Disney’s growth in recent years which should not be shocking when you consider how much growth ESPN has seen. That being said, there continues to be a lot of competition for Disney and with NBC Sports now becoming a top priority and FOX Sports also bringing in quality stuff and a lot of budgets, it’ll be a challenge for ESPN to remain as dominant. That being said, I think ESPN has by far the best product, the best integration across platforms and if you want to read more about how ESPN became so big, I highly recommend this article from Business Week


I think Disney is a nice fundamental long term play, what are your thoughts on it?

Disclaimer: No positions on Disney

Rating: 2.9/5 (11 votes)


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