Disney (DIS) stock has been on an absolute tear for a couple of years now and there’s nothing to indicate that rally will end anytime soon. On Wednesday, the House of Mouse announced a 15% hike in its dividend and changed the payment from annual to semi-annual.
Not surprisingly, shares of DIS stock are trending higher in morning trading on Thursday — something shareholders have probably gotten pretty used to. Disney stock is up over 80% in the last two years and 223% in the last five, besting the benchmark S&P 500 index by 49 and 135 percentage points, respectively.
And even though the company is worth almost $200 billion, DIS stock still has plenty more upside.
Disney’s Dividend Hike
The board of directors at the world’s largest entertainment company increased the annual dividend payment 15%, from $1.15 to $1.32 annually. That makes DIS stock’s forward dividend yield 1.1%, while previously it had been 1%. It’s not a huge change, sure, but it’s indicative of the confidence Disney has in its operations.
And why shouldn’t it be confident?
Disney has the top-grossing film of the year, Avengers: Age of Ultron, to its name, which has made$450 million in the U.S. and $918 million overseas thus far, bringing its global gross to nearly $1.4 billion. And although that total will likely be surpassed by Jurassic World — a production of Comcast‘s (CMCSA) Universal Studios — DIS still has much more to look forward to.
Inside Out, the newest Disney flick, just crushed expectations, hauling in more than $90 million in its opening weekend. Oh, and a little movie called Star Wars: Episode VII — The Force Awakens will hit theaters in December, probably breaking all sorts of records in the process.
You’d think that a company of Disney’s size might have trouble growing, but that doesn’t seem to be an issue. Earnings per share are expected to grow more than 17% this fiscal year and roughly 13% in fiscal 2016. All the time DIS stock trades at a very reasonable 24 times earnings and 20 times forward earnings, only slight premiums to the S&P 500’s current and forward multiples of 22 and 18, respectively.
As InvestorPlace‘s James Brumley notes, DIS stock is a “set-it-and-forget-it” type investment. Just buy the thing, sit back, and watch it work some magic:
“The purchase of the Star Wars and Marvel franchises are only a couple of examples of how the company understands the importance of retaining marketable products, regardless of their cost. This kind of thinking along with internally coming up with top character creations helps the company maintain this wide-moat status.”
Star Wars and Marvel should continue to churn out box office hits and theme park ideas for decades — perhaps centuries — to come. Even after its magnificent run in recent years, DIS stock still represents a buying opportunity.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
