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Disney Boosts Shareholder Return

Zacks Equity Research

The Walt Disney Company’s (DIS) strong results poise it well to enhance shareholders value through dividends and share repurchases. In a similar move, the company recently increased its quarterly dividend by 25% bringing the annualized payout to 75 cents per share with a dividend yield of 1.52%.

The quarterly dividend, after the hike, will come to 18.75 cents a share, up from the prior payment of 15 cents. The enhanced quarterly dividend will be payable on December 28, 2012, to shareholders of record as on December 10, 2012.

Disney’s dividend increase reflects its focus on capital deployment. Besides paying a dividend, the company’s capital deployment strategy includes stock buybacks. During the recently concluded fourth quarter of fiscal 2012, it bought back 19.1 million shares for approximately $973 million. In fiscal 2012, Disney repurchased 72 million shares for approximately $3 billion.

Moreover, Disney generated free cash flow of $602 million and ended the fourth quarter with cash and cash equivalents of $3,387 million, net borrowings of $10,924 million and shareholders’ equity of $39,759 million, excluding non-controlling interest of $2,199 million.

Further, Disney continues to invest in its core businesses and remains well positioned to drive revenue growth in the coming years through its strategic initiatives.

Walt Disney is one of the world's leading diversified entertainment companies. Alongside, the company commands a formidable portfolio of globally recognized brands, primarily its namesake brand Walt Disney, followed by ABC, ESPN and Marvel Entertainment. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corporation (NWSA) and Time Warner Inc. (TWX).

We maintain a long-term ‘Neutral’ recommendation on the stock. Additionally, the shares of Disney currently retain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

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