Don’t Ignore DIS Stock
Some income investors may have dropped Walt Disney Co
(NYSE:DIS) from their radar. The reason seemed obvious: in May 2020, the
company announced that it would not be paying the semiannual cash dividend for
the first half of 2020. And in November, management decided not to pay a
dividend for the second half of the year, either.
In other words, by itself, Disney no longer produces income
for investors. But I believe the company still deserves attention. In fact,
Disney stock remains one of the holdings in the model portfolio in my paid
advisory Income for Life. I featured DIS stock in the newsletter back in 2015,
and the model portfolio has not trimmed a single share.
There are several reasons why I’ve kept Disney stock in the
model portfolio and don’t plan to change that anytime soon.
First, selling blue-chip stocks in a panic is usually not a
good idea. Walt Disney Co’s dividend suspension was announced last May, when
the market was yet to make a full recovery and DIS stock was trading well below
its pre-COVID-19 levels. As it turned out, not panicking during a market panic
pays off. Disney stock not only bounced back, but actually went on to soar to
new heights.
Second—and long-term readers would know this—DIS stock
wasn’t exactly a high-dividend stock to begin with. The company was paying
semiannual dividends when every other stock in the Income for Life model
portfolio was paying quarterly or monthly dividends. Its last semiannual payout
of $0.88 per share did not translate to a high yield even when its stock price
was lower—and it certainly wouldn’t be a high-yield stock at today’s prices.
The model portfolio was well diversified, with plenty of higher-yielding companies
with more frequent payouts, so we didn’t need to worry about Disney stock’s two
missed payments a year.
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