Disney’s gift to shareholders signals an improved economy

Bob Moon Dec 2, 2011

Disney’s gift to shareholders signals an improved economy

Bob Moon Dec 2, 2011

Kai Ryssdal: This has been quite a week for the equity markets. All three major indices finished the week way better than they started — thanks mostly to that wonderful Wednesday they had.

Down in the data though there was something else, that kind of got buried in all the hoopla. Disney bumped its annual stock dividend to 60 cents a share. The biggest boost its had in at least 20 years, which, along with some other bold dividend increases, is being read in some quarters as a vote of confidence in the economy.

Here’s our senior business correspondent Bob Moon.

Bob Moon: An extra 20 cents a share can add up: For Disney’s biggest shareholder, the estate of the late Steve Jobs, it means an extra $27 million. And it may be a signal that goes beyond how well Disney is doing.

Barton Crockett watches the media conglomerate for Lazard Capital.

Barton Crockett: A lot of people have been worried — are we going to enter a double-dip recession? This tells you that Disney thinks the answer is no; they feel good about the world.

In fact, there’s a growing list of companies raising dividends lately: Starbucks better by 30 percent, Union Pacific more than 25 percent, Home Depot by 15 percent.

During the worst of the recession, companies hoarded cash. Some started buying back stock to raise their share value for investors, but now they’re committing themselves to direct paybacks.

Mark Hulbert is editor of the Hulbert Financial Digest. He says since the market tends to punish companies that cut dividends, this signals longer-term confidence.

Mark Hulbert: They’re saying, “Not only am I confident I don’t need the cash I currently have in the bank, but I don’t think I’m going to need it in the foreseeable future, and now I’m willing to increase my dividend and create this expectation of more permanence.”

Professor Roni Michaely isn’t so sure. He studies dividends at Cornell University and he points out when the economy was booming in the 1990s, companies didn’t pay many dividends. So he wonders if this just means they don’t have anything better to do with their cash.

Roni Michaely: When prospects maybe are not as good, they may give more money to their shareholders and invest less, because the economy’s not growing as fast.

Then again, maybe we’re making too much of this. It could be as simple as rewarding members of the Mickey Mouse Club.

“Mickey Mouse Club” clip: Why? Because we like you!

I’m Bob Moon for Marketplace.

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