Products of Walt Disney Company (DIS) have shaped lives of children and teenagers of multiple generations. Through its TV channels, movie productions, theme parks, resort hotels and many other segments, the company has been a major player in the US economy. As large and old as it is, the company still has plenty of room to grow.
Stability and Strong Management
The company has been around for nearly 90 years, and it only has had 6 CEOs to date. This means each CEO stayed with the company for an average of 15 years. This is rare in the corporate world and signifies stability, which many companies would love to have. Bob Iger, the company's current CEO has been a very successful leader so far. According to Walt Disney's last shareholder conference, every $100 of investment made by Mr. Iger is currently worth $190, indicating an amazing return of investment. On a side note, until last year, Steve Jobs was also a board member as well as shareholder of the company.
Aggressive Growth Initiatives
As stable as it is, the company's growth in the emerging markets have been very aggressive in the last 6-7 years. The company made a lot of strong investments in countries like India, Russia and China. For example, the company started or bought a number of TV channels in these countries. Many of these investments have already started to pay off and contribute to the company's 2011 earnings. These investments will continue to drive growth for the company in the future.
The company started construction for a new theme park Shanghai, China. This park is expected to be one of the largest theme parks in the world and attract millions of visitors from the fastest growing economy in the world. The company also invested a lot of money in new cruise ships and made some new additions to the existing parks. For example, in 2012 the company will be opening Cars Land, a 12 acre park in California, after huge success of World of Color, which opened in 2010. In a couple months, Disney Fantasy, the company's new cruise ship, will start its first voyage. This will be the sister ship to Disney Dream, a high-demand cruise ship since 2010. The company will continue to increase number of its Disney Stores and redesign some of the existing ones. In addition, the company will test a new concept called Disney Baby, a retailer that will sell baby products. It looks like growth never stops at Disney.
The company's acquisitions of Marvel and Pixar have added a lot of gun-power to the company's growth opportunities. Because of Marvel, the company can make movies with a lot of new characters that did not belong to Disney before (e.g., Iron Man, Thor and Captain America). Pixar's technological innovations and creativity have been helping improve the quality of many recent animations released by the company. These two acquisitions will continue to pay off for Disney for the foreseeable future.
In 2011, the company posted the highest amount of revenue and earnings of its 90 year history. Particularly strong drivers of growth were ESPN, ABC, movies and Disney Stores. The strong growth came from a large variety of geographical locations and business segments rather than relying heavily on certain products or geographies. This trend is likely to continue for a long term as the company is expected to achieve all-time high numbers again in 2012.
A Word on Dividends
In the last year, Disney raised its dividend rate by 50%. This sounds amazing, but the company's current dividend yield is still low, at 1.37%. Still, this wouldn't bother me as Disney is still a growth company. Even without the dividends, the company resulted in capital appreciation of 87% in the last 10 years, beating both S&P 500 and Dow Jones Industrial indexes by a large margin. On a side note, Disney has raised its dividend rate for 56 years in a row.
In conclusion, I believe that Disney is a great company to own for those seeking relatively safe growth. The company is run by the right people, in the middle of strong growth, innovative and creative in producing cash flow. Things can only get better for Disney.
Disclosure: I am long (DIS).