Disney Raised Its Dividend by 50% Last Year. Don’t Expect a Similar Bonanza This Time.

Disney (DIS) is set to release its fiscal Q4 2026 earnings on Nov. 17. Last year, the company announced a 50% increase in its annual dividend, raising it to $1.50. Let's explore whether a mega hike is possible this year.

Disney’s Dividend Policy

To begin with, let’s look at Disney’s dividend policy. The company pays dividends semi-annually, unlike the usual quarterly payouts. While some companies have a set payout mechanism and link dividends to their earnings or free cash flows, Disney’s dividends are quite ad hoc.

The company suspended its dividends in 2020 as the Covid-19 pandemic took a toll on its earnings. It reinstated the payouts in late 2023, beginning with a semi-annual dividend of 30 cents, which was roughly a third of the pre-pandemic payout.

Disney has since increased the dividends gradually, including the generous 50% hike last year. However, the payout is below the 88 cents semi-annual dividend that the company paid before the pandemic. The entertainment giant's dividends have been trying to catch up with the pre-pandemic payouts, and it would be fair to expect them to surpass that level. However, while Disney might increase its dividend for the next fiscal year when it releases its Q4 earnings next week, I don’t believe it would be to the extent we saw last year.

Dividend Payout Ratio Is Quite Comfortable

To be sure, Disney has a lot of legroom to raise dividends, as its payout ratio based on the expected earnings this year is just over 21%. The company’s earnings are expected to rise almost 8% next fiscal year, so there is ample scope to raise dividends generously. However, while the company has the capacity to raise dividends significantly, I believe the company would play it safe and refrain from a major hike.

First, the entertainment industry is currently witnessing turmoil, which is reflected in stock prices. Both Disney and Netflix (NFLX) have sagged this year and are underperforming the market. With intensifying competition from Alphabet's (GOOG) (GOOGL) YouTube and the perceived threat from artificial intelligence (AI), investors have plenty of worries when it comes to entertainment names. From a capital allocation perspective, Disney might prefer buybacks given it is still cheap by historical standards. Incidentally, during their previous earnings, Disney asserted that it finds its stock “undervalued” and increased this fiscal year’s buyback target to $9 billion, $1 billion higher than its previous forecast. 

Furthermore, given the current macro environment, Disney might prefer a relatively modest increase in dividends. While theoretically dividends are at the board’s discretion, companies don’t often lower the payouts unless they are under severe financial strain. 

Finally, Disney is reportedly considering mass layoffs to rein in costs. The management might face probing questions about these planned layoffs during the earnings call, and a massive dividend hike at the same time would make for bad press.

How to Play DIS Stock Ahead of Earnings?

DIS stock has seen double-digit gains over the last month and is trading close to its 2026 highs. More than anything particular about Disney, the rise could be attributable to sector rotation wherein investors have ditched tech stocks to buy shares in other sectors, including beaten-down names in consumer-facing and discretionary sectors.

Disney’s valuations still look comfortable at a forward price-to-earnings (P/E) multiple of 15.7x. It should, however, be seen in context, as the sector has seen a serious de-rating over the last year, and even streaming giant Netflix, which has historically traded at a significant premium to Disney, trades at a depressed multiple of 18.3x.

Overall, my view about Disney remains unchanged. While DIS stock is offering decent value at these prices, I am not inclined to add more shares provided the opportunities elsewhere.

On the date of publication, Mohit Oberoi had a position in: NFLX , GOOG , DIS . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.