Disney reaffirms July dividend and executive pay

[juice0358]

While furloughing over 100,000 cast members, Disney has reaffirmed its July dividend to shareholders and salary for executives. This is not a good look for a company that prides itself on family and creating magic through guest experiences with cast members. The dividend payment will be close to 1.5 billion dollars or close to $15,000 per employee that could have been set aside to help support their workforce.

Canceling a dividend is not unprecedented, especially in an economic atmosphere like this, but making this move shows Disney is not about family or magic and truly about their bottom line and stock performance. I have never been a big fan of Universal because I have always bought into the magic of Disney, but the fact that Universal is paying their employees 80% of their pay until May 31st has had me rethinking where my family will be spending future vacations.

In times like these certain people and corporations will rise above and I for one am going to remember it once this is all over.

 

[rteetz]

Do you have a link?

Also Disney can’t just take a dividend and tell stockholders oh sorry were paying our employees with this instead can they? That doesn’t seem like something that would go well.

You also have to understand Universal is owned by Comcast which is still very much functioning through this. Disney parks are not owned by a cable/internet provider. Disney’s current main source of income is Disney+. Everything else they do is shut down

 

[juice0358]

https://www.ft.com/content/db574838-0f40-41ce-9bcd-75039f8cb288

https://www.latimes.com/business/story/2020-04-19/disney-stops-paying-100000-workers
Sorry the FT article requires a subscription, edited with a free article.

Here is the link and yes, 100% Disney can say they can not pay a dividend this quarter due to the economic impact of the virus on their business. It happens literally all the time and would be WAY more prudent than drawing down more debt (they are up to 20B in credit for cash reserves at this point). It's a black eye on the company to go about it this way.

 

[rteetz]

https://www.ft.com/content/db574838-0f40-41ce-9bcd-75039f8cb288

Here is the link and yes, 100% Disney can say they can not pay a dividend this quarter due to the economic impact of the virus on their business. It happens literally all the time and would be WAY more prudent than drawing down more debt (they are up to 20B in credit for cash reserves at this point). It's a black eye on the company to go about it this way.

I don’t know. Disney is still covering benefits for employees so it’s not like they are just doing nothing.

 

[marinejjh]

I don’t know. Disney is still covering benefits for employees so it’s not like they are just doing nothing.

They wont have to worry about getting dividends for the next quarter.

 

[New Mouse]

I don’t know. Disney is still covering benefits for employees so it’s not like they are just doing nothing.

Take off the I work for them glasses and realize at the end of the day every employee is expendable to them as long as the shareholders and execs get theirs.

 

[rteetz]

Take off the I work for them glasses and realize at the end of the day every employee is expendable to them as long as the shareholders and execs get theirs.

I don’t work for Disney and never have. Execs have taken pay cuts too by the way.

 

[Krandor]

Do you have a link?

Also Disney can’t just take a dividend and tell stockholders oh sorry were paying our employees with this instead can they? That doesn’t seem like something that would go well.

You also have to understand Universal is owned by Comcast which is still very much functioning through this. Disney parks are not owned by a cable/internet provider. Disney’s current main source of income is Disney+. Everything else they do is shut down

Disney does own ABC and ESPN both of which are still operating. ESPN obviously is hurting with no new sports events but is still running. ABC should be ok right now but the hit to pilot season and some shows not finishing their full season is going to have some effects in summer and even into fall if new shows can't be produced. Disney+ has a similar issue if production on new shows gets delayed but like ABC that is going to be a lagging effect.

 

[CastAStone]

Disney does own ABC and ESPN both of which are still operating. ESPN obviously is hurting with no new sports events but is still running. ABC should be ok right now but the hit to pilot season and some shows not finishing their full season is going to have some effects in summer and even into fall if new shows can't be produced. Disney+ has a similar issue if production on new shows gets delayed but like ABC that is going to be a lagging effect.

The way advertising is booked on network TV ABC isn’t really in a place to cash in on higher viewership. A&E networks, which Disney owns half of, and Hulu, yes, but ABC set ad rates and sold most of their valuable ad inventory months ago.

Not to mention that a lot of businesses have stopped advertising due to corona.

 

[spiders]

Here is the thing about the furloughs. It seems like, the average since it varies by state, is paying $1,000 per week. That is probably a lot more than what a lot of the furloughed cast members are making.

Also, since everyone else can furlough and send their employees to unemployment then it would be foolish of Disney not to take advantage of that.

 

[CastAStone]

If Disney wants to take on debt from private capital markets and then use that to pay a dividend, who cares? If the money came from the Government you should be furious but honestly they borrowed the money mainly from a bunch of mutual funds and are giving the dividends mainly to a bunch of mutual funds.

Cutting your dividend is perceived by Wall Street as a panic move and it would likely inhibit their ability to borrow money at low rates moving forward. Keeping the dividend projects confidence.

Now the employee thing is different, but the system we’ve put into place for publicly traded companies in the US really constrains their options. There is a lot the government could do to ensure that the banks and mutual funds that own companies don’t force them to prioritize investors over employees but this sentence is getting dangerously close to politics so I’ll just leave it at that.

 

[CastAStone]

Here is the thing about the furloughs. It seems like, the average since it varies by state, is paying $1,000 per week. That is probably a lot more than what a lot of the furloughed cast members are making.

Also, since everyone else can furlough and send their employees to unemployment then it would be foolish of Disney not to take advantage of that.

Florida unemployment is half your salary/average recent pay up to $300 per week. The feds are currently kicking in $600 more.

 

[spiders]

Florida unemployment is half your salary/average recent pay up to $300 per week. The feds are currently kicking in $600 more.

Even so...let's assume the average is $15 per hour. $15 per hour is $600 per week. You take Florida's $300 and you add in the federal $600 and you're making $300 more by not working. I will also stop with my thoughts on that as that is getting dangerously close to politics.

 

[Krandor]

The way advertising is booked on network TV ABC isn’t really in a place to cash in on higher viewership. A&E networks, which Disney owns half of, and Hulu, yes, but ABC set ad rates and sold most of their valuable ad inventory months ago.

Not to mention that a lot of businesses have stopped advertising due to corona.

Agree. ESPN while still operating is likely taking a hit right now with no MLB and basketball and stuff like that to broadcast. The Michael Jordan documentary will help some but that is just a one thing.

 

[CastAStone]

Even so...let's assume the average is $15 per hour. $15 per hour is $600 per week. You take Florida's $300 and you add in the federal $600 and you're making $300 more by not working. I will also stop with my thoughts on that as that is getting dangerously close to politics.

Yes, IIRC Disney cited that some of their employees would be better off in the short term on unemployment in their letter apologizing for furloughing them.

 

[Chuck S]

Wall street evidently thinks they can afford a dividend, and is happy to see it, Without a dividend, their stock would tumble worse that it has, while fund managers would be selling, as fund managers main drive is dividends and growth stocks. That is part of the reason Eisner is gone, he was reinvesting profits and France was losing money, so the stock prices didn't go up very fast. That is all the Wall Street fund managers care about.

 

[OSUZorba]

If Disney wants to take on debt from private capital markets and then use that to pay a dividend, who cares? If the money came from the Government you should be furious but honestly they borrowed the money mainly from a bunch of mutual funds and are giving the dividends mainly to a bunch of mutual funds.

Cutting your dividend is perceived by Wall Street as a panic move and it would likely inhibit their ability to borrow money at low rates moving forward. Keeping the dividend projects confidence.

Now the employee thing is different, but the system we’ve put into place for publicly traded companies in the US really constrains their options. There is a lot the government could do to ensure that the banks and mutual funds that own companies don’t force them to prioritize investors over employees but this sentence is getting dangerously close to politics so I’ll just leave it at that.

The way dividends work has never made since to me. Dividends should be based on a percentage of profit, not a straight $/share.

The real problem is top executives and board members get a ton of their pay in stock, so they have a vested interest in keeping dividends high even if it is at the detriment of the company. Any company that continues to pay dividends in Disney's situations should immediately forfeit any chance of any type of bailout money. If you make dumb short sighted decisions when you are in the middle of the situation, then you can live with your consequences in bankruptcy. Of course, bankruptcy does wonders for shareholder value.

In 2008 many companies slashed their dividends, because that is what it took to save their business. Of course the stock price took a hit, but that should not be the primary focus of a company under a huge financial crisis unless they are planning on actually issuing new shares to raise captial (which also generally hurts the price). The primary focus should be on staying out of Bankruptcy while being in a strong enough position to capitalize on the next expansion cycle.

Not saying this will make Disney go to BK, just saying they shouldn't get a penny of bailout money to keep them out of it if it comes to that.

 

[CastAStone]

The way dividends work has never made since to me. Dividends should be based on a percentage of profit, not a straight $/share.

The real problem is top executives and board members get a ton of their pay in stock, so they have a vested interest in keeping dividends high even if it is at the detriment of the company. Any company that continues to pay dividends in Disney's situations should immediately forfeit any chance of any type of bailout money. If you make dumb short sighted decisions when you are in the middle of the situation, then you can live with your consequences in bankruptcy. Bankruptcy does wonders for shareholder value.

In 2008 many people slashed their dividends, because that is what it took to save the business. Of course the stock price took a hit, but that should not be the primary focus of a company under a huge financial crisis unless they are planning on actually issuing new shares to raise captial (which also generally hurts the price). The primary focus should be on staying out of Bankruptcy while being in a strong enough position to capitalize on the next expansion cycle.

Agree with most of this, but bankruptcy and bailouts are not the position Disney is in.

Management gets paid in stock *explicitly* to make sure they focus on keeping the stock price high. That’s not an accidental effect, it’s the whole reason they do it. Every time I get a restricted stock grant from my publicly traded employer the accompanying letter lets me know this is the case.

 

[Chuck S]

The way dividends work has never made since to me. Dividends should be based on a percentage of profit, not a straight $/share.

The real problem is top executives and board members get a ton of their pay in stock, so they have a vested interest in keeping dividends high even if it is at the detriment of the company. Any company that continues to pay dividends in Disney's situations should immediately forfeit any chance of any type of bailout money. If you make dumb short sighted decisions when you are in the middle of the situation, then you can live with your consequences in bankruptcy. Of course, bankruptcy does wonders for shareholder value.

In 2008 many companies slashed their dividends, because that is what it took to save their business. Of course the stock price took a hit, but that should not be the primary focus of a company under a huge financial crisis unless they are planning on actually issuing new shares to raise captial (which also generally hurts the price). The primary focus should be on staying out of Bankruptcy while being in a strong enough position to capitalize on the next expansion cycle.

Not saying this will make Disney go to BK, just saying they shouldn't get a penny of bailout money to keep them out of it if it comes to that.

A low stock price would be a grave concern, it would allow well funded corporate raiders to buy large blocks of stock, possibly taking control of the company, knowing better times are coming. They could even spin the parks and resorts off and sell them to a competitor, like Comcast. Then they'd likely spin off DVC to Marriott or Hilton. Disney World would be nothing more than a real estate holding company. Disney is making the right financial moves to hold the company together and keep it intact.

 

[Jrb1979]

A low stock price would be a grave concern, it would allow well funded corporate raiders to buy large blocks of stock, possibly taking control of the company, knowing better times are coming. They could even spin the parks and resorts off and sell them to a competitor, like Comcast. Then they'd likely spin off DVC to Marriott or Hilton. Disney World would be nothing more than a real estate holding company. Disney is making the right financial moves to hold the company together and keep it intact.

While that's true, its still a bad look for Disney. Especially after borrowing 5 billion dollars.