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Disney cuts $1.6bn dividend as virus stalls park openings

The Walt Disney (NYSE: DIS) stock price fell as investors reacted to the board’s decision to cut its first-half dividend saving $1.6bn, as its parks business is hit lockdown measures across the world.

“These are always very tough decisions,” said chief financial officer Christine McCarthy, adding that Disney will revisit its dividend policy in six months.

The decision also came after the world’s largest entertainment company reported a 90% profit drop for the March quarter, with expectations for more damages in the third quarter of 2020. The stock trading price of Disney remained under pressure since the beginning of this year. The business has been forced to close parks, cancel cruises and delay future productions.

Disney

Although its second-quarter revenue jumped almost 21% year over year to $18bn amid robust growth from media networks and direct-to-consumer segments, the virus outbreak took a $1bn bite out of its parks operating income.

The park’s operating income fell 58% year over year to around $600m in the second quarter. All twelve theme parks around the globe have been closed for at least two months.

The company said it will reopen its theme park in China next week with new protocols that include temperature checks at the gate, masked guests, and no more than 30% capacity. The Shanghai Park has been closed for the last four months.

“We’re looking at all of our locations and how best to begin the reopening process, including a gradual reopening and/or partial reopening of certain locations,” Disney Parks chief medical officer Dr Pamela Hymel said in a statement. “For example, the opening of retail and dining locations prior to the opening of our theme parks.”

The company says substantial growth from media networks and direct-to-consumer business segments would help in offsetting the negative impact of parks’ business.

Disney

The direct-to-consumer business has been driving growth from the Disney Plus streaming service. The company said in an earnings call that its paid subscribers rose to 54.5m at the beginning of May due to staying at home policies, reflecting a sharp growth from 33m subscribers by the end of March.

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    Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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