Mickey Mouse first appeared on cinema screens nearly a century ago, and he is still the face of the Walt Disney Company, a massive media and entertainment conglomerate. What started as a cartoon studio has grown into a nearly $300 billion conglomerate, including amusement parks, television networks, and film studios. Disney is known as one of the most famous corporations in the world. Globally, thanks to those iconic mouse ears and typography.
The corporation, situated in Burbank, California, is a behemoth in the entertainment industry with a lengthy history of acquiring rivals. The Walt Disney Company most recently completed its acquisition of 21st Century Fox in 2019, which included several films and television businesses and a stake in Hulu. Disney also owns television networks (ESPN, ABC, and the Disney channels), content companies, streaming services, and theme parks.
While Disneyland bills itself as "the happiest place on earth," Disney's stockholders have not had the best of times on Wall Street in recent years. Disney stock has provided total returns of around 41% (assuming dividends are reinvested) in the last five years, which is less than half of the S&P 500 Index's 108 percent returns. Aside from its poor stock market performance, investing in Disney comes at a cost: the company is more than three times as costly as the benchmark index, according to the price-to-earnings ratio, which is a crucial measure of valuation.
Despite this, investors are lured to Disney's stock in the same way that tourists flock to its theme parks. Disney's stock has more than tenfold increased since its initial public offering (IPO) in 1957 when it was $13.88 a share. Many stock splits have kept the company's price within reach of many investors, and the stock has traded in the $100 to $200 range for the past five years. Here's how to buy Disney stocks.
An overview of Disney
Despite the fact that the Walt Disney Company is best known for its theme parks, it is a far larger corporation.
In the 1920s, Disney began as a cartoon studio and the home of Mickey Mouse and has since grown to become a gigantic entertainment conglomerate with over 223,000 people.
Today, Disney is divided into various business segments:
It owns various television networks, including FX, National Geographic, and ABC News. There's also the Disney Channel to consider.
Sports: It also owns and controls ESPN, which broadcasts live sporting events.
Movie production: Disney's film production encompasses the blockbuster brands Lucasfilm, Star Wars, Pixar, and Marvel, as well as live-action and animated films.
Cruise line: The Disney Cruise Line currently has four ships, with three more sets to join the fleet in the coming years.
Resorts: In the United States, Disney owns and runs two large theme parks: Disneyland in California and Walt Disney World in Florida. Parks can also be found across Europe and Asia.
Retail: The Disney Store has over 330 locations across the world and is also available online.
Streaming: Disney also owns Hulu, Hotstar, and ESPN+, in addition to Disney+.
Credit cards: Disney has teamed up with Chase to provide two separate credit cards: the Disney Visa Card and the Disney Premier Visa Card.
Disney generates revenue from a variety of sources, including ticket sales, streaming subscriptions, and licensing of its well-known characters.
The company's ticker symbol is DIS, and it is traded on the New York Stock Exchange (NYSE). The COVID-19 epidemic recently wreaked havoc on Disney's operations, particularly its theme parks and cruise line, resulting in a $4.72 billion loss in the second quarter of 2020.
Disney's common stock, on the other hand, has long been considered a blue-chip stock, which means it's a large, well-established firm with a track record of growth. Despite the fact that blue-chip stocks fluctuate like other stocks, investors often have faith in the company's management team and its ability to deliver high-quality products.
Be prepared to pay a considerable amount of money if you decide to buy Disney stock. The price of Disney stock has fluctuated between $85.98 and $179.12 during the last 52
Disney stock tends to be costly due to its history of growth and earnings. Disney's stock has risen 46 percent in the last three years. That isn't to say that Disney is a risk-free investment. Its previous success is no guarantee of future results, and you can't expect the stocks to continue to appreciate in value, especially given market volatility. In the stock market, there is always the possibility of losing money.
The Fundamentals of the Disney stock (DIS)
On Wall Street, Disney has a perennial allure, and it manages to compete for attention with equities like Apple, Tesla, and Amazon, which are younger and flashier. While Disney isn't among the S&P 500's largest constituents — it's currently ranked in the Top 20 — it is a blue-chip stock. Because Disney's stock has been a member of the smaller and more exclusive Dow Jones Industrial Average since 1991, this is the case. As a result, both shareholders and non-shareholders keep a careful eye on the company.
The stock of Disney is traded on the New York Stock Exchange under the ticker DIS, and it is part of the communication services category, along with Netflix and ViacomCBS. The Disney media and entertainment distribution division generates the majority of the company's revenue (now 75 percent). Because it comprises Disney theme parks, Disney cruise line (and other experiences), and merchandise, the company's revenue is more in line with the consumer discretionary category.
Even if you don't have a set of mouse ears stashed up for your next vacation to Disneyland, you need to consider buying shares in the company to gain exposure to its rapidly expanding media division. However, before you do so, you should look at the company's financials in depth. Start by looking over Disney's most recent earnings reports, which you can find in the investor relations area of the company's website or in records filed with the US Securities and Exchange Commission by all publicly traded companies (SEC). These documents will provide information on Disney's operations, including the previously mentioned revenue split by business segment.
After you've gained a better grasp of Disney's operations, you should think about whether the company is a good fit for your portfolio. You should be more concerned about the news about Disney, its competitors, and the larger entertainment industry from major financial newspapers to better understand what causes Disney's share price to move higher or down on any given trading day. Additionally, input the company's ticker symbol (DIS) on a variety of financial websites to obtain information on the stock's past performance, valuation, and price-to-earnings ratio, among other things. You can also find reports prepared by Wall Street analysts on these websites that contain information about the company's operations and their stock "buy," "sell," or "hold" recommendations.
What Role does Disney Stock play in Your Portfolio?
You've examined Disney from every possible aspect. It's a well-known blue-chip stock with a long track record. However, there are still dangers in purchasing this stock.
Individual equities are always riskier than diversified assets like index mutual funds or exchange-traded funds. You'll need to examine 20, 30, maybe 40 companies to establish a diversified portfolio out of individual equities. That's a lot of effort.
Index funds and ETFs perform the heavy lifting for you by monitoring a market index and allowing you to hold stock in hundreds of different companies within one fund.When one firm in an index fund goes bankrupt, unlike an individual stock, you don't lose your entire investment. The other companies in the fund fill up the slack in the long run.
Diversification and asset allocation are two investing strategies that advise distributing your money among different firms, industries, and asset types (e.g., stocks and safer assets like bonds) to reduce risk. You should also consider your objectives and why you're investing in the first place.
None of the preceding is intended to deter you from purchasing Disney stock. In reality, buying stock in a publicly-traded firm is a fantastic way for adults and children to learn about how businesses operate and how the stock market works. You need to think about your entire portfolio and how Disney would fit into it.
The Financial Profile of Disney
Disney stock is regarded as a blue-chip investment by the majority of investors. This award is granted to giant corporations that have been profitable for an extended period and show no indications of slowing down. Blue-chip stocks are about as safe an investment as you can get, but they aren't immune to market downturns. So, despite the fact that Disney is a household name in the entertainment industry, don't let your guard down. Facebook and Walmart, for example, are both blue-chip companies.
A "$1,000 investment in Disney in 2007 would be worth $2,824" after ten years, according to a report. According to the research, this return outperforms Coca-Cola, Walmart, Microsoft, and McDonald's over the same time period.
Is Disney Stock Worth Investing In?
Even with a blue-chip like Disney, there is always a risk when investing in inequities. Unlike exchange-traded funds (ETFs) and other index funds, which track the aggregate performance of a group of assets, an equity's value is determined by its earnings. Even with a company like Disney's constant upward performance, this causes a lot more volatility.
For example, if Disney releases another installment in the Star Wars franchise, the stock price may rise. On the other side, a film office flop for Disney — or the closure of theme parks owing to the coronavirus outbreak — might have a major impact. If you don't mind the back-and-forth and plan to own the stock for a long time, Disney appears to be a good investment.
How Much Money Should You Invest in Disney Stock
If you choose to acquire Disney stock after doing your research and analyzing your portfolio, the following question is, how many shares should you buy? You may find the price of Disney by looking up its ticker symbol (DIS) and dividing the amount you have by the current share price. However, purchasing as much Disney merchandise as you can afford may not be the most fantastic option.
First of all, think about the following aspects of your financial situation:
What impact will Disney have on the rest of your portfolio? Investors frequently strive for a comprehensive portfolio of investments that span companies, industries, and assets. When it comes to equities, a basic rule is that no single stock should account for more than 10% of your total portfolio.
What are your immediate objectives? The stock market changes daily and is typically preferable for long-term investing. It is not the place to put your short-term funds when the goal is to protect what you have rather than to expand. Consider whether you have adequate money set aside in case of an emergency. Financial experts recommend setting aside three to six months' worth of living expenses.
How will you invest in the future? Rather than investing all of your money at once, dollar-cost averaging requires you to make frequent investments over time. This will assist you in avoiding purchasing solely when prices are high.
Three Ways to Invest in Disney Stock
Buy Stocks Directly from Disney
The Walt Disney Corporation Investment Plan is a Disney-run program that allows you to purchase stock directly from the company instead of through a brokerage firm. You can even buy shares on the internet.
To begin with, the stock purchase plan, fill out a registration form and either make a $200 initial cash commitment or authorize a minimum of four $50 recurring contributions. Through the shareholder website, you can purchase additional shares or sell your existing stock. Fees for placing market orders to purchase shares, as well as fees for selling your shares, are both relatively high.
This type of direct purchasing program has various advantages. With the brokerage account that traditionally serves as a middleman between investors and businesses, lowering the amount of money you may spend on fees and charges.
However, because account setup fees and other expenditures are standard, this may be a more expensive option to begin investing. Furthermore, because you are purchasing individual shares from a single company, diversifying your portfolio is more challenging.
Create a brokerage account
You may become a Disney shareholder in minutes if you have an online brokerage account. You can purchase Disney stock in one of two ways: Place a market order, which will be filled as soon as possible at the current market price, or a limit order, which will allow you to select the highest price you are ready to pay. You can also choose one of the aforementioned alternate approaches to get some Disney exposure in your portfolio by purchasing a mutual fund or ETF with a large Disney exposure. Additionally, your brokerage firm may be able to sell you fractional shares of Disney stock.
What is the best number of Disney shares to buy? The answer will most likely be determined by how much exposure you already have to this particular stock, how much money you have to invest, and how enthusiastic you are about it. It's crucial to think about why you want to invest in Walt Disney Company, just like you would with any other stock because your enthusiasm for the company could impair your judgment about its investment possibilities.
Experts usually advise that you restrict your exposure to any single stock to no more than 5% of your whole portfolio and instead concentrate on diversifying your holdings. As a result, the performance of your portfolio will benefit from a wide range of assets. When it comes to individual equities, around 20 different stocks, as well as bonds, ETFs, and other assets, can help you diversify your portfolio. It's also crucial to make sure that the money you're planning to put into stocks isn't better spent on something more immediate, such as paying off high-interest debt (such as credit cards) or building up an emergency fund that can cover at least three months' worth of costs.
Finally, remember that even the most venerable and well-known corporations, such as Disney, have experienced ups and downs in recent years. The corporation is still suffering from the financial impact of the pandemic, and some customer habits (such as traveling to the movies, amusement parks, and cruises) may take a long time to recover. If you acquire shares in Disney or any other firm, you should do it with the intention of making a long-term investment.
Invest in Fractional Shares
Purchasing fractional shares of Disney stock rather than single shares from Disney or a brokerage firm may be a better option for beginning investors who don't have a lot of money to put in initially.
Traditional investing requires you to have enough money to cover the entire cost of a share. For expensive firms like Disney, Apple, or Tesla, this could mean you won't be able to purchase shares unless you have hundreds or thousands of dollars to invest.
However, fractional shares allow you to invest by purchasing fractions of a share. Fractional shares are portions of individual shares that would enable you to invest right away, even if you have $5.
To buy fractional shares, you must first register a brokerage account with a business that permits you to purchase stock slices. Among the possibilities are:
Stash: You can build a Stash account for as little as $1 and begin investing right away. The cost of a report varies from $1 to $9 per month. 1,2
M1 Finance: M1 Finance allows you to register a free account and buy fractional shares.
Robinhood: Robinhood is a platform that allows you to buy fractional shares in over 5,000 companies and exchange-traded funds (ETFs).
Pros and Cons to You for Buying Disney Stock
Disney is a well-known corporation with a track record of high performance and profits. Investing in Disney, on the other hand, is not for everyone. Consider the following advantages and disadvantages before investing your money.
Pros
Disney's stock has historically done well on the stock market as a blue-chip stock. However, past performance does not guarantee future results.
Business model diversification: Most organizations specialize in one or two industries, such as health care or entertainment. The stock may suffer if the industry undergoes significant changes. Disney has a diverse business portfolio that includes everything from theme parks to streaming services, so it may be better prepared to weather economic storms.
Disney has a strong balance sheet, with more than $14 billion in cash and cash equivalents, which might help it weather business upheavals like the COVID-19 epidemic.
Cons
High cost: Disney's shares are costly, needing hundreds of dollars to purchase a single claim.
Increased risk: Investing in just one company puts you at a higher risk. If Disney fails to fulfill its targets, stock prices may fall, resulting in a loss of capital. If you wish to invest in Disney, a diversification approach that includes investing in other assets may be beneficial.
Effect of external factors: As the coronavirus outbreak demonstrated, external conditions outside Disney's control can have a significant impact on the company's stock prices. If events have an impact on tourism and film production, Disney's stock price may drop.
Because of Disney's relatively high stock price and consistent performance, purchasing Disney stock may make sense if you want to buy and keep it for long-term gains. If you're hoping for quick profits, it could not make sense.
FAQs about Disney Stock
Should You Invest in Disney Now?
Disney stock price has rebounded significantly after the COVID-19 incident as of January 2021. Many investors believe the company will continue to develop as a result of the popularity of its streaming service. And Disney has a track record of producing high-quality items and generating income.
However, investing in a single firm, especially one as well-known as Disney, comes with its own set of hazards. Look out for the Disney stock prospectus before investing and use tools like Morningstar to research the stock's performance. Making your own financial decisions depend on your own research.
What is the procedure for obtaining a Disney stock certificate?
Stock certificates, which are actual securities, are no longer available from Disney. Disney shareholders, on the other hand, can still buy collector certificates. These decorative certificates can be framed and given as gifts, but they are not actual securities that can be sold or exchanged on a stock exchange.
Is Disney a dividend-paying company?
Disney is known for paying dividends. It paid 88 cents per share in January 2020. However, due to the coronavirus pandemic and its economic impact, Disney has canceled its dividend payments for the rest of 2020.
What is the best way to buy Disney shares as a gift?
There are three options for purchasing Disney stock as a present. You could purchase them directly on the Walt Disney Company Investment Plan them directly. After that, you can make a purchase using a brokerage account. Finally, a professional financial advisor can be hired.
Final Thoughts
Disney is a hugely popular firm with a track record of strong stock market performance. However, you might not be a good fit for Disney stock. Consult an investment advisor to learn more about your alternatives. If one of these methods of investing in Disney stock attracts you, be sure to discuss it with your financial advisor.
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