The new year has arrived, and many investors are re-engaged and looking for new stocks to buy for 2015. While there are certainly a lot of great companies and exciting stocks to choose from, I believe there is one above all that you should go out and buy today.
And that’s Walt Disney Co (DIS).
Disney stock is sitting just below all-time highs, but it’s poised to go even higher this year. Here’s why.
Why Disney Stock Is Great to Own
When you buy Disney stock, you are buying an extremely diversified company that not only operates in a number of different areas, but realizes incredible synergies in those areas.
These synergies essentially all begin with the Studio Entertainment division. Disney produces a new film, which (depending on its success) can then leverage the success of a franchise of characters to the other divisions of the company through merchandise in its Consumer Products division, new attractions and rides with its Parks and Resorts division, and even new TV shows within its Media Networks division.
But the power of Disney’s diversification doesn’t stop with its synergies. The company has amazing brands — cash cows with wide moats.
For instance, the ESPN franchise is the clear leader in sports reporting and entertainment, while other networks like ABC and The Disney Channel are huge, successful players in television. The Media segment, which the aforementioned units all fall under, accounted for 43% of the company’s $48 billion in revenue last year.
Meanwhile, Disney Parks and Resorts, which accounted for 31% of revenues, has its footprints all over the world and is a leader in the theme park industry.
While Disney’s strong brands are a great argument for growth, the company does put a little bit of cash back into shareholders’ hands via dividends. DIS recently increased its annual payout from 86 cents per share to $1.15 — a 34% increase that follows a 15% increase in 2013. While that translates into just a 1.1% yield currently, you may see a better yield on cost in the future — all told, Disney’s dividend has improved 187.5% in just the past five years.
Why You Should Buy Disney Stock Now
If Disney so clearly is a solid investment for the long term, why is it so important to buy today?
All of Disney’s major divisions will likely keep on pumping out cash and growing at a healthy rate, but the studio division has the potential to post staggering numbers in 2015. In 2014, Disney’s Studio Entertainment division accounted for 15% of the company’s revenue (22% higher than the year before) and 12% of operating income (more than double the previous year). And this occurred in a relatively weak year for Disney movies.
However, 2015 is unlikely to go without a few blockbusters. Disney is slated to release a new iteration of Cinderella, a new Marvel Avengers film, a lesser-known Marvel comic character film, a Steven Spielberg Cold War spy thriller and two Pixar films, not to mention the latest from the mother of all franchises, Star Wars: The Force Awakens.
The revenues strictly from these new films will help boost Disney stock in the coming year, not to mention how DIS should be able to leverage their success in 2015 and beyond.
Bottom Line
With so many potential blockbuster movies set to be released in 2015, Disney should continue to rise over the next year, barring some unforeseen disaster.
But don’t just buy Disney stock now for what it can do for you in 2015. Buy it for what it should do for five, 10, 15 years ahead as it reaps the reward of its own virtuous media-merchandising cycle.
As of this writing, Matt Thalman was long DIS.
