You’ve brainstormed vacation spots, assessed financial data, and completed your homework. Now you’re asking yourself, “Where do I go from here?”
A “No Brainer”
As you recall, The Walt Disney Company (NYSE:DIS) utilizes its assets well, especially considering its large amount of property, plant, and equipment. Additionally, it is poised for revenue increases from the coming Star War series as well as from Hong Kong Disneyland.
The Walt Disney Company (NYSE:DIS)’s Shanghai theme park should also be a home run—so, think long term. Even with an initial investment of $4 billion, and projected EBITDA of nearly $400 million, the firm is further positioning itself as a market leader.
Even better, though, is that The Walt Disney Company (NYSE:DIS)’s other business segments are growing and generating profits. Acquiring (nearly pilfering) Marvel Entertainment in 2009 for about $4 billion seems to be paying off nicely. For example, The Avengers grossed over $1.5 billion in the box office. Now, analysts anticipate that Iron Man 3 could come near, or even exceed, that mark. Plus, consider the future revenue streams from merchandise! Clearly, The Walt Disney Company (NYSE:DIS) made a phenomenal forward looking acquisition. It will continue to reap the benefits.
Competitive Landscape
Viacom, Inc. (NASDAQ:VIAB) will also gain from Marvel’s productions. Its subsidiary, Paramount, is still receiving money on an 8% proceed agreement with Marvel in exchange for distributing Marvel films. Additionally, Paramount will earn 9% of the proceeds from Iron Man 3.
Connecting this information with Viacom, Inc. (NASDAQ:VIAB)’s ratios and its quarterly dividend payments seem to make it a favorable investment. However, I anticipate the stock will fluctuate around its existing support level of $64. To move forward, management must address the 18% net loss for last quarter, the unfavorable decreases in its programs being distributed, and the aggressive expansion from competitors. Be on the lookout for the company news releases.
Like The Walt Disney Company (NYSE:DIS), Time Warner Inc (NYSE:TWX) is a consistent dividend stock poised for growth. It recently posted 24% first quarter profit. Its long term profit potential is even better, though. With the spinoff of its Time, Inc. magazine division—with an average enterprise value of $3.9 billion—Time Warner Inc (NYSE:TWX) is shedding a heavy asset and production based component of its business. Additionally, by divesting Time Inc., the managers will be able to better focus, the structure will be leaner, and stockholders will likely receive the created value.
Thus far, Time Warner has purchased nearly $870 million of its stock, and it is to gain from its new capital structure. As seen below, its price is outperforming the S&P. But, the major increase from about 5%-15% growth clearly shows that stockholders are in favor of the direction of Time Warner, especially since the public announcement to sell Time Inc.
Need another reason to choose Disney?
Look at dividend payments.
| Current Yield | 2002 Dividend | 2012 Dividend | Compound Growth | |
|---|---|---|---|---|
| Disney | 1.20% | $0.21 | $0.75 | 13.58% |
If we assess dividend payments from the past 10 years, we see that The Walt Disney Company (NYSE:DIS)’s CAGR of dividends paid is over 13%! With current inflation rates, such a finding is coveted and hard to beat.
Earlier this year, Comcast Corporation (NASDAQ:CMCSA) increased its annualized dividend payment by 20% to $0.78. However, even with an increase in revenue, earnings, and free cash flow, the firm continues to lose a valuable customer base. It has lost nearly 360,000 video customers over the past year, and with increasing prices that number will further increase. The problem is that increasing revenues and decreasing customers means that Comcast Corporation (NASDAQ:CMCSA) is receiving a higher margin, at the expense of customers. And, in such a tight industry with Netflix, Inc. (NASDAQ:NFLX), for instance, Comcast may soon be losing more than just customers.
Conclusion
If you’re thinking about a lower risk, long term investment, consider adding Time Warner to the mix. If you look to make money in short swings in days or weeks, you have some options.
But one thing is for sure: stick with Disney.
The article Kids Love Disney and So Should You originally appeared on Fool.com and is written by Brendan Marasco.
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