Disney: Still A Buy for DRIP Investors

06/02/2020 5:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

I’d be lying if I said the dividend suspension at Disney (DIS) didn’t catch me a little off guard, observes Chuck Carlson, a leading income expert, a specialist in dividend reinvestment plans and the editor of DRIP Investor.

However, the company’s move to preserve capital is understandable given the hit that the firm has taken on nearly every aspect of its business. Indeed, the lockdown of movie theaters has created havoc with the company’s film division.

The lockdown has also created stress in Disney’s theme-park business. The economic slowdown will also have an impact on advertising, which will hit the company’s broadcast unit. The one bright spot has been Disney’s streaming services. The firm’s Disney Plus streaming service reached 50 million subscribers in just five months.

While it is likely that the ill-effects from the coronavirus will impact results for the remainder of the year, I still remain confident that Disney’s brands will be able to come out of this down period intact.

I do think its theme parks will see strong demand in 2021, as will its film business. And continued strength in streaming is another reason to like the rebound potential of these shares.

The stock has picked up a bit in recent trading, buoyed partly by hopes for better treatments for Covid-19 and expectations of loosening “stay-at-home” orders throughout the country. Despite the recent bounce, these shares still trade at a 23% discount to their 52-week high of $153.

While I wouldn’t be surprised to see the stock have fairly choppy trading action over the next few months, I remain a long-term bull on these shares and would be willing to do buying at current levels and especially on any dips below $100.

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