Income investors saw some of their dividend streams shrivel up last year. A lot of companies suspended their payouts in early 2020, bracing for the impact of the COVID-19 crisis. The pandemic isn’t fading in the rearview mirror the way it was two months ago, but it’s fair to start wondering when some of the more prolific companies that nixed their distributions will return to cutting shareholder checks.
Disney (NYSE:DIS), Ford (NYSE:F), and AMC Entertainment Holdings (NYSE:AMC) are three widely followed stocks currently yielding 0%. Will that change? More importantly, does that have to change? All three stocks are trading sharply higher now than they were when they paused their payouts. Let’s see how soon the dividends can return — and how likely that is to happen in 2022.
The House of Mouse was shelling out $0.88 a share twice a year until the pandemic hit. It wasn’t a surprise. Its theme parks and cruise ships as well as the multiplexes it relied on for theatrical distribution of its popular films all closed down in mid-March of last year.
Disney braced for the worst, and reality proved to be substantially kinder. After a pair of quarterly losses during the early stretch of the crisis Disney has come through with three consecutive quarterly profits. Even its theme parks segment returned to profitability in its latest report.
The dividend has a good chance of returning at some point in the next year, but Disney is probably in no rush to make it happen. Disney+ is expected to continue to lose money until 2024, and it needs content to keep growing. Some analysts have argued that a better use of the $3.2 billion it returned to investors in 2019 would be better served on new video content. It’s fair, but it would still be a surprise if the distributions don’t come back in Disney’s fiscal 2022 if the economy holds up with its end of the bargain.
The other name on this list that could beat Disney to the payout restarting lines is Ford. The automaker pioneer was a bigger draw to income investors than Disney given its much larger pre-pandemic yield. Ford has also been profitable in four of the past five quarters, one more period in the black than Mickey Mouse.
If Ford doesn’t return to its quarterly distributions soon it won’t be because it lacks confidence in its near-term outlook. Ford is just investing in its reinvention. It has made a well-received push into electric vehicles, and it’s a market darling again. The stock is trouncing the market in 2021 with a 42% year-to-date gain. If Ford thinks it will need to preserve more of its capital to ramp up its presence in electric vehicles it may not return to its chunky suspended dividend that would translate to a yield of nearly 5% at the current price. However, it would be surprising if it doesn’t come back with at least a smaller token quarterly disbursement in the coming months.
It’s not going to happen. A lot has happened at AMC since it last cut a dividend check. It’s still losing money, and even if it wasn’t, its share count has exploded nearly fivefold over the past year. In other words, it would cost AMC five times as much to pay its former per-share dividend.
There are clearly better uses for its money. It can buy back stock. It can update its theaters. It can make more investments in home streaming to make sure it’s not left out of the migration away from the neighborhood multiplex. It can even invest in exclusive content.
None of these options may seem feasible in the near term, with analysts expecting the red ink to continue until 2024. However, AMC has armed itself with a record $2 billion in liquidity. It does have options to improve its turnaround chances, but you can be sure that it won’t involve sending some of that cash to its shareholders in the form of dividend checks. Let them eat complimentary popcorn.
Disney and Ford should return to being dividend stocks in the next year. Payout out regular distributions just isn’t part of the movie trailer at AMC.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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