Disney Raises Dividend 14% as Firm’s Finances Rebound

Reflecting growing confidence in Walt Disney Co.’s financial outlook, company directors on Wednesday gave shareholders an early holiday gift: their first annual dividend increase in six years.

The annual cash dividend, payable Jan. 6, was raised 14% to 24 cents a share. The move had been expected since Chief Executive Michael Eisner declared earlier this year that he would recommend an increase.

Blue-chip companies nationwide have been upping their payouts in part because Congress last year lowered the maximum tax rate on dividends to 15%.

Disney’s directors Wednesday also elected Fred H. Langhammer, the former chief executive of cosmetics giant Estee Lauder Cos., to the board. The appointment marked another move by the directors to address criticism that the board was loaded with insiders and cronies of Eisner.

With the installation of Langhammer next month, nine of the 12 directors will be independent. And the board said it planned to elect an additional independent director within the next year.

Since 2002, Burbank-based Disney has added to its board top businessmen from other big corporations, including Kmart Holding Corp. Chief Executive Aylwin Lewis and Clorox Co. Chairman Robert Matschullat. Langhammer, 60, is chairman of global affairs at Estee Lauder, having stepped down as CEO in July.

Although expected, the dividend increase was welcomed by shareholders and analysts as a signal that the company was optimistic about its economic recovery.

“It’s certainly a vote of confidence in the company’s recent performance,” said Patrick McGurn, senior vice president of Institutional Shareholder Services. “Shareholders like returns, but they also like the signal it sends.”

For his part, Eisner, who cited record Disney cash flow in 2004, said the hike was part of a plan to return cash to investors. He promised that Disney would aim to continue boosting dividends in the future.

The payout also suggests that Disney isn’t likely to carry out any major acquisitions, said Anthony Valencia, an analyst with TCW Group in Los Angeles.

“It’s just another way of saying, ‘We’re going to be financially responsible and prudent,’ ” he said.

Disney’s finances and stock price have continued to rebound from the sluggish performances that helped spark a stinging rebuke of Eisner at the company’s annual shareholder meeting in March.

Last month, Disney said it had rounded out its fiscal year with a 24% surge in profit in the fourth quarter, fueled by gains at its ESPN sports network and a continued recovery in its theme park business.

The company still struggles, however, with its Euro Disney operation, which posted its biggest annual loss in a decade and recently warned in a report that it expected losses to continue.

Euro Disney is paying more royalties to Disney, and its newest park hasn’t performed as expected. Shareholders of Euro Disney are set to vote on a financial restructuring plan for the business Dec. 17. Disney owns 39% of the company, which operates two theme parks outside of Paris.

Shares of Disney rose 80 cents to $27.68 on the New York Stock Exchange. The shares have gained nearly 20% in the last year.