The magic of Disney
The Walt Disney Company (NYSE:DIS), known for its entertainment venues worldwide, operates a variety of different media outlets that include a broadcast television network, as well as numerous television and radio stations, and even digital and publishing operations. In addition, the company produces, licenses, and distributes animated and live-action television and movie programming.
Started in 1923, The Walt Disney Company (NYSE:DIS) has grown exponentially since its humble beginnings. In addition to earnings from Disney’s myriad of entertainment venues, the company also operates related theme park and other travel options, including Disneyland, Disney World, Disney Cruise Lines, and a number of resorts located throughout the world.
Recently, The Walt Disney Company (NYSE:DIS) entered into a multi-year agreement with Electronic Arts Inc. (NASDAQ:EA) for the purpose of developing and publishing new “Star Wars” related video games. The company has also been breaking earnings records with mega-hit blockbuster movies of late, including the new Iron Man 3, which opened in early May with a $175 million weekend in the U.S. and Canada. This sum exceeds the amount that the previous two Iron Man titles combined generated throughout their opening weekend. This is just one of the clear indicators that the $4 billion purchase of Marvel Comics by Disney in 2009 has been a profitable endeavor.
This also continues to show just how powerful the media and entertainment division of The Walt Disney Company (NYSE:DIS) really is. In staying in line with its strategy to maximize the value of its content, the company has recently started to distribute its content in new ways, such as iPod formatted video and online video-on-demand.
While The Walt Disney Company (NYSE:DIS)’s current dividend is standing at $0.75 per share — equating to a 1.20% annual dividend yield to investors — its share price is hovering near the high point of its 52-week range. Looking forward, analysts are mixed, however, the majority cite that this stock still holds growth opportunity for investors in both the short and the long run. With projected cash flow this year of more than $8 billion, it’s my view that Disney is a stock worth buying.
Other entertainment venues in the chase
One of the other media industry giants and a close competitor of Disney is Time Warner Inc (NYSE:TWX). This company has been following quite closely behind in at least some of The Walt Disney Company (NYSE:DIS)‘s footsteps. Headquartered in New York, this media and entertainment monster operates in three primary segments — television & film, networks, and publishing. The company has also begun the operation of digital media properties, primarily consisting of brand-aligned websites.
Revenue comes from a variety of other sources, too, including the sale of DVD and Blu-ray Discs, premium pay cable channels such as Cinemax and HBO, and the licensing of original programming to cable system operators.
The success of all of these areas combined has led the shares of Time Warner 66% higher over the past 12 months — including a rise of more than 26% year-to-date for 2013, and a market capitalization of more than $56.6 billion.
Investors in Time Warner Inc (NYSE:TWX) can capitalize on the company’s dividend payout of $1.15 per share, offering an annual dividend yield of 1.90%. This, coupled with an estimated operating income this year of more than $7.5 billion, should aptly reward share holders in both the near and long-term.
News Corp (NASDAQ:NWSA) is yet another diversified media company with a worldwide presence. With its production of cable network programming and licensing of news programs, this media outlet had also branched out into the publishing world through the creation of free-standing inserts that include coupons and other types of in-store marketing products, aiming to catch the eye of consumers. News Corp. is also the owner of Dow Jones, the publisher of The Wall Street Journal.
News Corp (NASDAQ:NWSA) reported better-than expected earnings on May 8. While the publishing and education segments remained slow, strengths in the cable division helped the company beat the sell side estimates. For the fiscal third quarter, revenue rose 14% to $9.55 billion. EPS came in at $0.36, a penny better than expected. The company now expects total operating income for the fiscal year 2013 to increase up to 10%.
Once again, cable networks showed the most impressive results, accounting for about three-fourths of the total operating income, with a year over year growth in the mid-teens. Whereas, with only 2% increase in the operating income, advertising growth was far more modest. The company also confirmed that it is on track to split-off its slow-growing publishing business by the end of June.
One reason for News Corp (NASDAQ:NWSA)’s planned exit from the publishing arena has a great deal to do with massive declines in print advertising revenue. This certainly goes hand in hand with the dying newspaper industry overall. With the ability to obtain news and other information — including coupons — via mobile devices and online, media companies are seeking ways to capitalize on more digital offerings, while ridding themselves of more antiquated products and services.
While investors can earn a small amount of dividend income — $0.17 per share, per quarter — they may be better off waiting for share price appreciation. However, that remains to be seen, once News Corp. sells off its publishing entity.
The bottom line
Just as with Time Warner Inc (NYSE:TWX) and News Corp, The Walt Disney Company (NYSE:DIS) will need to continue its focus on the more profitable arms of its empire, while ridding itself of its less profitable divisions. Over the past few years, Disney has proven to be successful with its acquisitions — which have certainly helped in keeping the share price high and investors happy.
Looking forward, Disney stock appears to possess several positive attributes, including its forward moving momentum. Should the company continue to capitalize on blockbuster movies, its shares should continue rewarding investors.
The article A Few Reasons Why This Stock Might Get Better originally appeared on Fool.com and is written by Nauman Aly.
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