Disney Is Having a Rough Year and It Has Been This Way for a Long Time

Stocks to sell

So far this year, Disney (NYSE:DIS) stock is down 15%. The market is not pleased with its earnings, negative free cash flow and huge spending on content. That has spilled over to the poor returns for DIS stock.

For example, in its fiscal Q1 report for the quarter ending Jan. 1, made $1.15 billion in net income (continuing operations). But its actual cash flow from operations was negative. It lost $209 million from continuing operations and after spending on investments and capital expenditure, it lost $1.19 billion for the quarter.

Moreover, most of the company’s operating income was from its Parks, not as much from its Disney Channels, either linear or streaming. For example, it made just 808 million on $14.58 billion in media revenue. But its Parks made $2.45 billion on much less revenue of $7.23 billion in revenue.

In fact, its streaming or direct-to-consumer operating income was a loss of $593 million on $4.69 billion in revenue. In addition, the company is spending huge amounts on its media content, which so far has yet to pay off.

These are some of the reasons why DIS stock has done poorly. Moreover, it has been this way for a long time.

Investors in DIS Stock Are Not Happy

Disney stopped paying its semi-annual dividend in December 2019. So it has been over two years since the company has been paying any sort of dividend to shareholders.

Moreover, Disney stopped buying back its shares in the fall of 2018. It used to have a very powerful buyback program, with over $3.5 billion in repurchases annually.

So, for the past three years, there has been no return of any capital to shareholders. How has the stock done then?

On Sept. 30, 2019, DIS stock was at $130.32. On, April 7, 2022, it closed at $131.87. That is a 1% return over 2.5 years. That works out to a compounded annual gain of 0.47% each year. Shareholders would have made more money leaving their cash in the bank, unreal as that sounds. Money market rates are higher than that.

On Oct. 1, 2018, the stock was at $116.24. So, at today’s price that results in an ROI of 13.45% over 3.5 years. This is simply nothing to write home about.

On the date of publication, Mark Hake did not hold (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.

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