Bowing to the need to conserve cash with its business staggering under the coronavirus pandemic, Walt Disney said today it would forgo paying a semi-annual cash dividend this July, a historic decision and one that will allow it to preserve $1.6 billion.
CFO Christine McCarthy said the board made the decision to forgo a dividend payment for the first half of the fiscal year that would have been applied in July. It preserves the $1.6 bilion in cash assuming the company had held the dividend stable at 88 cents a share, she said on a conference call to discuss Disney’s quarterly earnings,
“We are evaluating a wide range of scenarios with respect to the potential ongoing impact of COVID-19 on our business,” she said.
Companies have been under some pressure to reduce dividends although some, like AT&T, have opted to keep the payouts which are poular with investors. Disney has a long history of consistent dividend payments that goes back over 40 years.
“These are always very tough decisions,” McCarthy said, noting that the company will revisit the issue of the dividend over the next six months.
In a separate press release, Disney said, “The Board’s action is one of several measures the Company has taken in the wake of the pandemic, including reducing capital spending, cutting salaries for senior management, and making the difficult decision to furlough employees.”
Disney has also cut capital expenditures by $400 million from last year, to about $900 million as it reduces construction and refurbishment at its parks.
Proactive steps it’s take to ensure a cash cushion included securing a series of debt sales and loans, including a sale of $6 billion in senior notes, a $925 million term loan and a $5 billion, one-year bank facility. Combined with its existing revolving credit facility of $12.25 billion, the company has over $17 billion it can draw on.