Looking for Value and Decent Dividends? Then Avoid Disney Stock.

Stocks to sell

Because the Walt Disney (NYSE:DIS) company has been around for so long, you might assume that Disney stock is a perfect set-it-and-forget-it portfolio holding. Yet, I encourage you to conduct your due diligence and check the facts. Disney’s value proposition to the company’s investors probably isn’t as good as you think it is.

Granted, there are a couple of potentially positive news items about Disney that are worth mentioning. So, we’ll delve into the details now. Don’t think about buying Disney shares, though, until you’ve learned all of the relevant facts, including the unfavorable ones.

Two Positive Points for Disney

To be fair and balanced, I must admit it’s good news for Disney that the company finally resolved its legal battles with Florida Gov. Ron DeSantis this year. Now, Disney and Florida seem to be on amicable terms, to where the company might open a “fifth major theme park at Walt Disney World,” according to The Associated Press.

Assuming the Florida-Disney deal is fully approved, could end up investing as much as $17 billion in Florida. That’s a hefty capital outlay, so only time will tell whether another Florida-based theme park could substantially boost Disney’s revenue and income.

Meanwhile, activist investor Nelson Peltz has reportedly ended his proxy battle with Disney and even sold all of his Disney shares. That’s important because, with no share stake in Disney, Peltz won’t have any meaningful influence over the company.

Hence, that’s good news for anyone who may have been worried about the prolonged Peltz-Disney soap opera, which appears to be over now.

Disney’s Unfavorable Yield and Value Proposition

Despite these two pieces of positive news, Disney stock still isn’t back up to its pre-COVID-19 level. That’s undoubtedly frustrating for Disney’s long-term investors. Still, it least they can count on Disney providing a decent dividend — right?

It depends on how one defines a “decent” dividend. To be perfectly honest, there’s not much meat on the bone here for income-focused investors.

Currently, Disney offers a forward annual dividend yield of just 0.29%. For reference, the communication-services sector’s average dividend yield is slightly more than 2.5%.

Come to think of it, maybe Peltz made a smart decision when he divested his Disney stock stake. Even though the share price is still below its pre-pandemic level from 2019, Disney’s valuation is surprisingly high.

To quantify this, note that Disney’s GAAP-measured trailing 12-month price-to-earnings ratio is a whopping 109.33x. In contrast, the sector median P/E ratio is around 18x.

Disney Stock: The Good News Isn’t Good Enough

With positive news coming out of Florida and the Peltz proxy battle over, Disney looks like it’s on the fast track to massive success. Disney shares just aren’t enticing from a value-and-yield investment standpoint.

Disney stock has been “dead money” since late 2019 and the bullish argument isn’t very persuasive today. Don’t get me wrong — I’m not saying that investors need to dump their Disney shares like Peltz did.

It’s just that Disney doesn’t seem to offer much “magic” for its shareholders in 2024. So, feel free to look for more promising opportunities in the financial markets.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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