The best Consumer Cyclical Stock? New Buy

The best Consumer Cyclical Stock? New Buy

My lowest sector in my stock portfolio has been Consumer cyclical. After my recent sale of cineplex it really had a nice hole that needed to be filled. As I have stated before this sector is my most hated sector to invest in, but I really try to even out my portfolio sectors to keep me diversified. After doing a bunch of research and absolutely loving the potential of this stock, I made the buy.

Walt Disney Company

The company is an absolute powerhouse. I probably don’t even need to talk about them. I was raised on Walt Disney, Lion king and Alladin were my go to. My parents forked out the money to take me to the parks as a kid. I’m sure we will be doing the same as well with our kids, just like almost every family with kids.

Disney brought in 55.137 billion dollars (USD) in 2017. 23.51 billion from its media networks, 18.42 billion from parks and resorts, 8.38 billion from studio entertainment and finally another 4.83 from consumer products and interactive media. Its pretty safe to say they are nice and diversified.

Media Networks

The pending deal with 21st century fox, will make them a content powerhouse. This will give them even more shows for one of their many streaming services! Netflix is going to have some serious competition. Disney keeps talking about creating a streaming service for all their disney content, Espn and possibly other content.

They also own ESPN which has actually been a negative but they are planning on starting a sports streaming service. Yes a sports streaming service! This will be absolutely huge. A sports streaming service will have no competition and will do pretty well. I know so many people who keep cable for the sports channels only. ESPN plus will launch this spring for $4.99 per month. An absolute steal of a deal. Once this becomes available there is a really high chance I will sign up. I only wonder how good their Canadian Content will be at the start. I’m sure in time though they will have Canadian Sports.

Parks

Disney has parks all over the world and keeps expanding. Personally I’m excited for the Pandora exhibit, I loved avatar and I look forward to all the new avatar movies which they will be making.  The park is always busy and the ticket price will surely be increasing in price as its just something you need to do with your kids. There is also disney cruises now, which I hear good things about.

Studio Entertainment

Its pretty safe to say Disney dominates the movie scene these days. From kids to adults there is something for everyone. Walt disney has a couple production groups. Walt Disney Pictures, Walt Disney Animation, Pixar, DisneyNature, Lucasfilm and Marvel studios. I mentioned that I think movie theater’s are slowly falling back due to lack of movies and people wanting to stay home and stream. Almost all movies I go see at theater’s are disney’s! With Disney’s potential streaming service I could see a direct rental/buy program in the future.

Moat

Warren Buffet talks about how he likes companies with a wide moat. Disney definitely has one, I really cant even think of their competition. Do you remember dvd’s? I never buy them anymore, but I have bought the classic Disney movies on dvd for our kids to watch. That’s got to say something!

The Stock

O.k, this is the only negative I can think of about Disney. Their dividend is nothing to get excited about. Its current Yield is 1.63% although that is over its 5 year average of 1.3%. The dividend payout ratio is about 29%, which makes it super safe. (although nothing is guaranteed) Disney has increased the dividend the last 8 years and their 5 year average growth rate is just north of 30%. Just massive. The price/ earning ratio is 17.68 which is lower than their 5 yr average of 20%. Disney Pays the dividend semi Annually in January and July.

The stock has a 52 week low of $96.20 and a high of $116.10 and morning star gives it a fair value of $117.44. Disney has also rewarded shareholders average annual returns of more than 14% for the past half a century. According to Fool.com

The Purchase

I was really debating buying more Proctor and Gamble Shares or starting a position in Disney. Although Disney is not a dividend king, I feel the stock has a tonne of potential for the next couple years. We bought 20 shares at just over $102 a share. This will add $33.60 to our forward dividends.

Conclusion

The dividend yield is low and that caused me to him and haw. After researching more and more, I liked it. I have passed on stocks in the past because of their low yield and watched their stock double or triple in price. I’m happy with the buy and its one of those stocks you can tell people about and they instantly know the name.

Hukuna Mattata – It mean’s No Worries!

What are your thoughts? Whats your favorite Disney Movie?

Cheers

Rob

Hey I’m Rob, creator of Passive Canadian Income.

In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.