Why One Analyst Believes That THIS Was Disneys’ BIGGEST Mistake of 2023

As a result of the dwindling profits and uncertainty brought on by the COVID-19 pandemic, Disney (among other major companies) brought the payout of cash dividends to a halt.

At the end of 2023, Disney announced that the company would be reinstating cash dividends, and stakeholders and Disney fans took this as a great sign — celebrating their upcoming earnings. However, one analyst believes that the reinstatement of dividends ISN’T a good thing — and that Disney could be making a huge mistake.

Reuben Gregg Brewer, an analyst with The Motley Fool, shared his thoughts on the dividends in an article that broke down exactly what this could mean for the company. Here are just a few key takeaways from his article.

He first shared that even though it has been three years since the pandemic, Disney (like most companies) are still facing challenges across the business. Brewer shared that the dividend suspension made sense financially — it allowed for a stockpiling of cash in an uncertain (and potentially financially-dooming) time.

Now, though, the dividend will be reinstated at $0.30 per share in January, 2024. While it was important for Disney do take action like this to reinstate investors’ trust in the company, Brewer argues that a token dividend would have been less financially risky — say, $0.01 a share, OR they should have waited until the company isn’t standing on such shaky financial grounds. Now, Disney is depleting a stockpile of cash while the company is still facing uncertainty.

Although the company had a good fiscal year, as shared throughout impressive quarterly earnings reports, which showed an overall increase of revenue in the Parks, Experiences, and Products sector thanks to the reopening of Shanghai Disneyland, revenue in California at Disneyland, and on board Disney Cruise Line.

However, the issue is that this revenue isn’t driving profit. It’s merely a step towards returning to normal. A normal that Disney CEO Bob Iger is attempting to reach by restructuring the company to focus on the future of Disney+ and other streaming assets.

Although the company saw success within the streaming sector in 2023, attaining nearly 7 million more domestic subscribers, the company’s streaming endeavors is still a bit risky. A world that focuses on direct-to-consumer, online broadcasting, and streaming bundles as a means of replacing cable television is new to every media giant out there. Disney is no different. There is still much to be lost if this doesn’t work.

So, what does Brewer think the company should do instead? Well, for starters, he thinks that only a token dividend of one cent per share should have been given, if dividends are going to be reinstated no matter what. Better yet, though, he thinks that the company should have saved that stockpile of cash to continue investing in the company — as stakeholders would eventually rebuild trust and form a sense of security in their investment all over again when the numbers speak for themselves at upcoming earnings calls.

We’ll continue to keep you updated with Disney news, so make sure to follow along for more so that you’re always in the loop and never miss a thing.

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