Tuesday, February 9, 2016

Recent Buy: The Walt Disney Company

2016-02-03: Bought 27 shares of DIS at $95.43 per share.

The Walt Disney Company (NYSE:DIS), more commonly known as Disney, is a diversified international family entertainment company based in Burbank, California. 

Founded on October 16, 1923, by Walt Disney and Roy O. Disney, the company established itself as a leader in the American animation industry before diversifying into live-action film production, television, and theme parks. Today, Disney operates in five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media.

DIS currently pays a dividend of 71¢ per share semi-annually. At the current price of $92.11, the stock yields 1.54%. The company has a 6-year streak of dividend increases.

I already own 100 shares of DIS, so with this buy I'm increasing the total number of DIS shares in DivGro to 127. With a weight of 5.45%, DIS is by far the largest position in DivGro.

So, why did I add even more shares? Well, DIS is the only stock that is split between two accounts. Before this buy, I had 27 shares in my FolioInvesting and 73 shares in my Scottrade account.

I added 27 shares to my Scottrade account to round out the number of shares to 100.
I'm planning to write covered calls against some of my DivGro positions in my Scottrade account. Writing (or selling) covered calls is a safe way to earn extra income on stock you own. Typically, you sell one contract for every 100 shares you own and collect an option premium in return.

As a low yielding stock, I consider DIS to be a good candidate for covered call writing. The strategy would allow me to earn a little more from my DIS shares.

When selling covered calls, especially those involving dividend paying stocks, you're hoping to keep your shares and to continue collecting dividends. You'll want the stock price to remain below the option's strike price until expiration date.  If that happens, the option expires worthless and you keep your shares.

If the stock price moves above the strike price, the option holder will most likely exercise the option and call away your shares. You'll be paid the strike price per share. Since you no longer own the shares, you're no longer eligible to receive dividends.
I have not yet decided to sell the 27 shares in my FolioInvesting account. I'm taking a wait-and-see approach, as DIS will be announcing earnings later today.

This buy adds $38.34 of expected dividend income and increases DivGro's projected annual dividend income to $8,398.84.

What do you think of this buy and my plan to start writing calls against stock I own? Any advice you can share?


  1. DIS is a wonderful company and one I want to own over the long term. I'm also looking into the options market more since capital is likely to be light to non-existent. Whenever our free cash flow for investing ramps back up I'm contemplating becoming more active with options both calls and puts.

    I'm curious as to the reason why you brought your total shares up to 110 in your Scotrade account if your intent is to write calls. Do you just still want to own shares of the company if some of them get called away?

    1. I just glanced at FolioInvesting and it looks intriguing. It sounds somewhat similar to Motif. How do you use your account there? I'm thinking DCA-ing into positions multiple times throughout the month would be a pretty good way to use their platform. Although you need at least $2,900 to invest per month to keep the commission at 1%. Definitely looks interesting though from just glancing at it.

    2. Hi PiP -- in answer to your question about the total share count, that turned out to be a typo in my article. I had 73 shares and by adding 27 share, I now have 100 shares in my Scottrade account.

      I've been using FolioInvesting since 2002, precisely because it provided a low cost way to create diversified portfolios. I traded much more in those days, though. Now with dividend growth investing I'm not so sure I benefit that much anymore, cause I don't trade that often. Nevertheless, it is nice to trade without having to pay commissions!

  2. I love DIS and I think your covered calls are a good idea in a declining market like this as it's likely the shares will not have a huge jump anytime soon. Looks like you could make a few hundred bucks each month by selling a call option with a $95 or $97 strike. As long as your overall cost basis is above that or you are ok with the risk :). Please let us know how it works out for you!

    1. I'll keep my readers updated on my option execution strategy...

      I notice DIS is tumbling in after hours trading despite having announced record earnings. I'll have to look into what the premiums are like now...

  3. If I'm not wrong DISNEY is one of Peter Lynch favorite stock. Keep up the good work!

    1. Thanks for sharing, DGB!

      DIS had record profits last quarter, yet the stock price is down a few dollars per share. Interesting!

  4. Awesome buy! Dis just broke another record with star war. As a fan my self, I'm looking forward to the next two star war! It's going to be epic!

    1. A lot of fans were looking forward to reviving the Star Wars movies. I think Disney did a great job with it and look forward to the next episodes!

  5. Disney has been in downtrend for a while and I am getting interested lately. Good company with good moat. Very tempting :)


    1. Yup -- concerns about the changing landscape of cable networks, including the ESPN sports channels, are dragging the share price down. Good opportunity to get in, in my view!


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