Suspending or decreasing the dividend for one quarter wouldn't send the stock price plummeting under the situation. If this situation drags on for a year, that $1.5B will be sorely missed and the stock price will be in the tank regardless.
I agree right now Disney probably isn't a high BK risk at all, but that 1.5B is now debt they will be saddled with for a long time and will put them in a worse position in the future. Of course, they'll take another 1.5B in debt next quarter to do the same thing again, or end up killing the stock price even more at that point.
I see the borrowed credit as a strategic move. Disney is not in a great state right now. No company is really.
I never said the borrowed credit was a bad idea. A lot of companies are hurting so it makes sense. It just looks bad when you use some of that to pay off shareholders.
The 5 billion is a credit line, not a loan. Disney has access to it but may or may not draw on it. If they were certain they needed to draw on it they’d have issues more bonds.
The point I think OSUZorba was making is that saying “dividends are 37 cents per share this quarter” is less intelligent than saying “dividends are 18% of earnings before (or after) special charges until future notice”. They are both stickier than you’d imagine just because the image projected from cutting your dividend is so catastrophic among the investment community, but the latter would allow some leeway for the dividend to “automatically” fall in tough situations. It’s an interesting idea.
No matter the way you slice it, it still comes off looking bad. That's all that some of us are saying.
Only to a specific group of people. Investors understand dividends and realize why this was done. Patrons aren't really going to care. Employees may get riled up, but to be honest they got a pretty good deal out of Disney. Politicians will squeeze it for all it is worth. As will Abigail Disney I'm sure when she goes on her next tirade. But the people who keep Disney afloat, the large investors including pension and mutual funds, keeping the dividend will do more to keep the company in one piece than dropping it. Disney is a dividend paying stock. That's a significant part of its value as a company. Investors don't analyze Pixie Dust and Magic feelings. They value cash flow. So you don't mess with that unless you have to and Disney isn't there yet.
Don't hate the player, hate the game. That's what the rest of us are saying. We could fix this.
And remember, DIsney went from being classed as a long term investment to being a growth stock. Cutting dividends and falling stock pricing would not bode well at all with investors and fund managers. There would be a sell off, once again opening the door to raiders. Fund managers and growth stock investors really are concerned with one thing. I've had my small amount of Disney shares since 1998, just prior to the 3 to 1 stock split. IT really wasn't a growth stock back then, and dividends weren't much. But they were reinvesting the profits and building parks, making acquisitions, like ABC, and putting the company in a better position....aside from EuroDisney.
I'm not saying it's right or wrong But to your average person like me it looks bad.
Maybe but I’d bet the average person is focused on their own financials, health, safety, etc. right now and not Disney paying dividends.
Cedar Fair is in far worse shape than the Walt Disney Company. They just bought 2 Schlitterbahn Water Parks (New Braunfels and Galveston), None of their parks (12 total, incl. water parks) are what could be called world vacation destinations, not even Knott's, all are smaller regional parks, and many are only open seasonally. They don't have other business interests other than their parks, most of which operate seasonally, and a handful of hotels, they are small potatoes compared to Disney. Cedar fair's stock is up 6.5% to $26.10 per share, after securing $875 Million in financing today. Disney dividend yield is less than 2% of the value of their stock, Cedar Fair's is over 14%. Plus Cedar Fair has lost more than 1/2 of their stock price since February 20. They are ripe for a takeover right now. By comparison, Disney has lost about 25% of their stock price, even with worldwide closures.
Cedar Fair has a negative book value. They are in an liquidity crisis. Paying the dividend for them would remove funds they are contractually obligated to pay someone else. It's apples and oranges. The market already is panicked on Cedar Fair, that's why it was trading at one point for 1/4th of what Six Flags tried to buy it for 4 months earlier.
