Dan Loeb of activist investment firm Third Point called on Disney (DIS) – Get Report to permanently suspend its dividend and use those funds to beef up its offerings on the Disney+ streaming service, a media report says.
In a letter to the Burbank, Calif., company’s board that was reviewed by Bloomberg, Loeb said the $3 billion the company pays out annually would be better spent on content production.
“Beyond bringing additional subscribers onto the platform, increased velocity of dedicated content production will deliver several knock-on benefits spread across your existing base including elevated engagement, lower churn, and increased pricing power,” Loeb said, according to Bloomberg.
Third Point holds less than a 1% stake in Disney after opening a long position in the entertainment giant due to its bullishness on its streaming service.
Disney’s most recent dividend payment was 88 cents a share in January. After the coronavirus pandemic forced the company to close its theme parks and torpedoed its movie release schedule, Disney suspended its biannual dividend payment.
Disney paid a dividend for 64 consecutive years through 2019.
Last month, Deutsche Bank analysts upgraded the stock to buy due to streaming strength.
“Disney is succeeding in the land-grab phase of direct-to-consumer and has the most clear path to successfully transitioning its general entertainment programming and content production businesses into a globally scaled, vertically integrated streaming entertainment leader,” analyst Bryan Kraft wrote in a commentary.
The firm also raised the company’s price target to $163 from $128.
Disney shares at last check rose 1.6% to $122.91.
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