Wall Street Lauds Walt Disney Dividend Increase

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UPDATED: The entertainment conglomerate's stock doesn't move much, but some see further shareholder rewards in the company's future, and one analyst takes the hike as a sign that the firm, led by CEO Bob Iger, doesn't fear a double-dip recession.

NEW YORK - The Walt Disney Co.'s stock didn't move much in early Thursday trading, but Wall Street analysts overnight lauded the entertainment conglomerate's latest dividend increase, with some predicting more shareholder rewards in the future.

Barclays Capital analyst Anthony DiClemente called the 50 percent increase in Disney's annual dividend to 60 cents per share (link) a "surprise stocking stuffer." He said that this implies a new dividend yield of 1.7 percent, compared to 1.1 percent previously.

"This dividend raise, combined with Disney's accelerated buyback activity, demonstrates the company's willingness to return capital to shareholders," DiClemente said. "Given that Disney is currently undergoing an investment cycle at its [theme] parks, we believe a case can be made for more favorable return of capital policies once capital expenditure moderates in 2013 and beyond."

Credit Suisse analyst Spencer Wang said the dividend increase underscores the trend of increased returns of capital to shareholders in the media and entertainment sector and "supports our view that Disney has growing financial flexibility."

While he argued that Disney, led by CEO Robert Iger, could have raised its dividend higher, he said that "given the uncertain economic backdrop and planned capital spending in 2012, the measured approach is understandable."

Overall, Wang emphasized: "We believe that this dividend announcement will be positively received by the Street, although it’s unlikely to be a “game changer” for the stock."

Indeed, Disney shares in early Thursday trading hardly budged.

Lazard Capital Markets analyst Barton Crockett said the dividend news allows investors to draw a broader conclusion about the economic outlook. "We take that as a clear sign that Disney sees a healthy business and no double dip on the horizon."

S&P Capital IQ analyst Tuna Amobi maintained his  "strong buy" rating on Disney's stock after the dividend news. Wang maintained his "outperform" and $40 price target, while DiClemente continues to have a comparable "overweight" rating and $44 target on the stock.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai