Walt Disney (NYSE:DIS) is a king of content but it needed to deliver that content to consumers the way they want to consume it. Since 2016, it has begun transforming for that need…
Should You Buy Disney Today?
The last year was a major investment year for Disney, namely Twenty-First Century Fox for $71 billion and capital expenditures (“CapEx”) that were up 9.2% year over year to $4.9 billion, and the CapEx is set to increase by a further 10% next year.
Moreover, Disney expects the DTC & International segment to generate ~$800 million in operating losses for fiscal Q1 2020 but to be accretive to EPS for fiscal 2021 and realize cost synergies of more than $2 billion from operating efficiencies by 2021.
Because Disney is fully valued today, we think there are better investment ideas out there, such as from our top dividend ideas list. Investors may just get a better entry point in the coming 12 months.
Fairfax Financial Holdings Ltd. (TSX:FFH) is a curious stock that moves differently from the U.S. and Canadian stock markets. This potentially makes Fairfax a good candidate to trade while adding diversification to investors’ stock portfolios.
Fairfax’s business model is similar to Berkshire Hathaway’s (NYSE:BRK.A)(NYSE:BRK.B). It has an underlying insurance business that generates float as a source of low-cost capital to invest for higher returns. Fairfax’s insurance businesses operate on a decentralized basis, which allows Fairfax to focus on capital allocation.
In the first half of the year, Fairfax’s insurance businesses were profitable. It had a consolidated combined ratio of 96.9% for its insurance operations. The combined ratio of <100% implies profitability.
According to Prem Watsa, the chairman, CEO, and founder of Fairfax, the company can achieve a 15% return on shareholders’ equity with a 95% combined ratio and a 7% return from the investment portfolio.
BlackRock (NYSE:BLK) has a long growth runway thanks to its large-exposure to passive investments. Moreover, it’s trading at a good value today and offers a secure yield of 3%.
BlackRock is a Long-Running Winner
BLK has been a long-term winner, delivering 15-year total returns of 15.8% per year versus the S&P 500’s 7.4% return in the period. Its 10-year returns of 13.5% per year also won against S&P 500’s 12.9%.
BLK’s earnings can appear a bit bumpy but in reality is slow growth periods occurring after high-growth ones. For example, it had three years of double-digit rate growth followed by a slowdown in 2015 and 2016. Then, high growth resumed in 2017. What’s important is that its long-term growth is intact. For example, from 2007, before the last financial crisis hit, to 2018, the company’s earnings per share increased by 11.5% per year on average.
BlackRock’s consistent earnings growth has allowed the stock to begin paying a dividend in 2003. This year marks its 16th consecutive year of dividend growth. BLK’s five- and 10-year dividend growth rates are 11.3% and 15.5%, respectively.
With a payout ratio of ~48%, there’s a big buffer to protect BLK’s dividend, which is currently good for a yield of 3%. Investors can also expect dividend increases in the future to more or less match its earnings growth rate.