Walt Disney Co. (NYSE:DIS) has boosted its annual dividend by 25 percent, to 75-cents-per-share, amid the looming fiscal cliff. A key part of the higher annual dividend will be the December 28 date—before the Bush-era tax cuts set in.
Did the Fiscal Cliff Force Disney’s Hand?
“The move protects Disney investors from a possible increase in the dividend tax rate, which is set to rise as high as 39.6 percent from 15 percent with the year-end expiration of Bush-era tax cuts,” reports Bloomberg.
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CHEAT SHEET Analysis: Is the Dividend a Catalyst for Disney’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. In this case, investors cheered the dividend hike and more investors and funds are likely to consider purchasing Disney with a more attractive yield.
Disney’s yield of 1.5 percent is below the 2.2 percent average for the S&P 500. So there’s room for more Disney treats in the future. The higher annual dividend, as well as the flexibility to raise the dividend if needed, bodes well for Disney. While other competitors like Time Warner (NYSE:TWX) and Dreamworks (NYSE:DWA) will have to watch the size of the dividends they pay investors, Disney has the flexibility to increase its dividend prior to the potential fiscal cliff and tax increase.