When I wrote my review of the Walt Disney investment plan, I left out the most enjoyable part; the rewards of a long term ownership position in Disney. Today I will rectify that mistake so that everyone can see what happens when you invest in superior enterprises, and you treat them as a business that you own. Let’s take a look at the incredible gains of investing in the Walt Disney Company.
The year is 1987, and to be completely honest, based on the movies that Disney had been churning out, a lot of people would have been wondering why you would have invested. However, having seen the Great Mouse Detective, and detecting a renewed vitality at Disney you decided to invest. During the January of 1987, you bought a thousand shares of Disney. For somewhere around $59 a share, you were buying ownership in an entertainment company that was about to enjoy a renaissance. If you had managed to hold your shares through the 1987 crash, several wars in the middle east, dot-com boom and bust, and the worst economic downturn since the great depression you would be incredibly rich right now.
The $59,000 you were investing in the Walt Disney Company went into the beginning of the Disney Renaissance. In 1989 Disney brought the Little Mermaid to the screen. For the next couple of years Disney brought out hit after hit. Whether it was a fantasy movie with a compelling heroine (Beauty and the Beast), or a middle eastern orphan who becomes a hero (Aladdin), Disney could do no wrong. In 1992 Disney split its stock 4-1. Your 1000 shares were now 4000. It didn’t stop there though. Later movies like Hercules and the Lion King continued to drive people to the movies. With television stations like ESPN and ABC compounding Disney’s competitive advantage in entertaining people on the small screen, Disney’s stock continued to soar. In 1998 Disney again split its stock, this time 3-1. Those 4000 shares you had were now 12,000. At yesterday’s closing price of $110.71, your 12,000 shares are now worth $1,328,520. That isn’t all though. By investing in the Walt Disney Company, you were also entitled to any dividends that the company paid.
With Disney having a fairly low dividend yield, the company has been able to reinvest massive sums of money into the company. When Disney bought Pixar, I swear, it bought a studio that doesn’t know how to make a bad movie. The company later bought Marvel and the strong franchises that comes with it. In 2012, Disney bought Lucasfilm for about four billion dollars. The money that Disney laid out is in all probability going to be recouped with only two movies, Star Wars the Force Awakens and The Last Jedi. Everything on top of that is going to be gravy. All of the theme parks and expansions that are going on right now are only going to reinforce Disney’s absolute dominance as a company the likes of which the world has never seen. All of these reinvested projects allowed Disney to grow its dividend substantially over the past thirty years.
The following is Disney’s dividend per share (I included links if you want to check, but from 1994, you can use Disney’s 10-K). In 1987 Disney paid 0.32. Over the next thirty years Disney paid the following: 1988:0.38 1989:0.46 1990:0.57 1991:0.69 1992:0.49 1993:0.24 1994:0.29 1995:0.35 1996:0.42 1997:0.51 1998:0.39 1999:0.21 2000:0.21 2001:0.21 2002:0.21 2003:0.21
2004:0.24 2005:0.27 2006:0.31 2007:0.35 2008:0.35 2009:0.35 2010:0.4
2011:0.6 2012:0.75 2013:0.86 2014:1.15 2015:1.37 2016:1.49
When you tally up the dividends that Disney has sent you over the past 30 years, you see that Disney has sent you $127,050. Just as awesome is that Disney is now sending you more than $17,000 a year. That is significant money that you can use to buy vacations to Fiji, go shopping at high end clothing stores, or give to charity.
By investing in the Walt Disney company 30 years ago your $59,000 is now worth $1,455,570. If you had reinvested your dividends the amount would be higher, but even without the turbocharge of reinvested dividends you managed to compound your money at a rate north of 11% annually. You beat the S&P 500, and you crushed inflation. All you had to do was sit on your rear, read the annual report, and watch Disney grow your wealth skyward.
Investing in the Walt Disney Company is one of those decisions in your life that can change the course of it. You don’t have to delve into the esoteric of day trading. You don’t have to be the next Warren Buffett. There are around 50 companies in the world today that in the aggregate will beat the S&P, and everyone knows their names. Disney, Hershey, and Coke are some of them. It’s too easy , but that is one of the joys of life. You don’t have to be the smartest person on the block to get rich.