Walt Disney Co. (NYSE:DIS) | Dividend Discount Model (2024)

Dividend Discount Model (DDM)

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

  • Intrinsic Stock Value (Valuation Summary)
  • Required Rate of Return (r)
  • Dividend Growth Rate (g)

Intrinsic Stock Value (Valuation Summary)

Walt Disney Co., dividends per share (DPS) forecast

US$

Year Value DPSt or Terminal value (TVt) Calculation Present value at 16.10%
0 DPS01 0.88
1 DPS1 0.93 = 0.88 × (1 + 5.17%) 0.80
2 DPS2 1.00 = 0.93 × (1 + 7.64%) 0.74
3 DPS3 1.10 = 1.00 × (1 + 10.11%) 0.70
4 DPS4 1.23 = 1.10 × (1 + 12.58%) 0.68
5 DPS5 1.42 = 1.23 × (1 + 15.05%) 0.67
5 Terminal value (TV5) 156.68 = 1.42 × (1 + 15.05%) ÷ (16.10%15.05%) 74.29
Intrinsic value of Walt Disney Co. common stock (per share) $77.88
Current share price $97.05

Based on: 10-K (reporting date: 2023-09-30).

1 DPS0 = Sum of the last year dividends per share of Walt Disney Co. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

Assumptions
Rate of return on LT Treasury Composite1 RF 4.56%
Expected rate of return on market portfolio2 E(RM) 13.74%
Systematic risk of Walt Disney Co. common stock βDIS 1.26
Required rate of return on Walt Disney Co. common stock3 rDIS 16.10%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rDIS = RF + βDIS [E(RM) – RF]
= 4.56% + 1.26 [13.74%4.56%]
= 16.10%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Walt Disney Co., PRAT model

Average Sep 30, 2023 Oct 1, 2022 Oct 2, 2021 Oct 3, 2020 Sep 28, 2019 Sep 29, 2018
Selected Financial Data (US$ in millions)
Dividends ) ) ) 1,587) 2,895) 2,515)
Net income (loss) attributable to The Walt Disney Company (Disney) 2,354) 3,145) 1,995) (2,864) 11,054) 12,598)
Revenues 88,898) 82,722) 67,418) 65,388) 69,570) 59,434)
Total assets 205,579) 203,631) 203,609) 201,549) 193,984) 98,598)
Total Disney Shareholder’s equity 99,277) 95,008) 88,553) 83,583) 88,877) 48,773)
Financial Ratios
Retention rate1 1.00 1.00 1.00 0.74 0.80
Profit margin2 2.65% 3.80% 2.96% -4.38% 15.89% 21.20%
Asset turnover3 0.43 0.41 0.33 0.32 0.36 0.60
Financial leverage4 2.07 2.14 2.30 2.41 2.18 2.02
Averages
Retention rate 0.91
Profit margin 7.02%
Asset turnover 0.37
Financial leverage 2.19
Dividend growth rate (g)5 5.17%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-10-01), 10-K (reporting date: 2021-10-02), 10-K (reporting date: 2020-10-03), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to The Walt Disney Company (Disney) – Dividends) ÷ Net income (loss) attributable to The Walt Disney Company (Disney)
= (2,3540) ÷ 2,354
= 1.00

2 Profit margin = 100 × Net income (loss) attributable to The Walt Disney Company (Disney) ÷ Revenues
= 100 × 2,354 ÷ 88,898
= 2.65%

3 Asset turnover = Revenues ÷ Total assets
= 88,898 ÷ 205,579
= 0.43

4 Financial leverage = Total assets ÷ Total Disney Shareholder’s equity
= 205,579 ÷ 99,277
= 2.07

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.91 × 7.02% × 0.37 × 2.19
= 5.17%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($97.05 × 16.10%$0.88) ÷ ($97.05 + $0.88)
= 15.05%

where:
P0 = current price of share of Walt Disney Co. common stock
D0 = the last year dividends per share of Walt Disney Co. common stock
r = required rate of return on Walt Disney Co. common stock

Dividend growth rate (g) forecast

Walt Disney Co., H-model

Year Value gt
1 g1 5.17%
2 g2 7.64%
3 g3 10.11%
4 g4 12.58%
5 and thereafter g5 15.05%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 5.17% + (15.05%5.17%) × (2 – 1) ÷ (5 – 1)
= 7.64%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 5.17% + (15.05%5.17%) × (3 – 1) ÷ (5 – 1)
= 10.11%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 5.17% + (15.05%5.17%) × (4 – 1) ÷ (5 – 1)
= 12.58%

Walt Disney Co. (NYSE:DIS) | Dividend Discount Model (2024)

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