Disney's Dividend Suspension Doesn't Spell Trouble

The results of Walt Disney 's (NYSE: DIS) fiscal second quarter (ended March 28, 2020) showed the impact of the actions the company has taken to control COVID-19 's spread. Closing its theme parks and halting cruises primarily hurt revenue and profitability in its parks, experiences, and products segment. Its other businesses, such as media networks and direct-to-consumer and international, also felt the effects, since there was less original content for sports and other programming, which hurt viewership and advertising.

In total, management estimated the coronavirus pandemic slashed Disney's pre-tax quarterly profit by $1.4 billion. This brought this year's figure down to $1.1 billion compared to last year's $7.2 billion. However, the year-ago figure includes $5 billion of other income that was primarily due to a one-time gain when Disney doubled its stake in Hulu to 60%.

With the company's U.S. theme parks remaining closed, film releases delayed, and live sports halted (hurting its ESPN networks), Disney will feel the effects in the third quarter. Although there are some positive signs, such as the company opening up its theme park in China and taking reservations at Florida's Walt Disney World starting on July 1, Disney's near-term future remains murky. With that as a backdrop, Disney decided to skip the semiannual dividend it usually pays in early July. Typically, a company not making its regular payout sends a negative signal to investors. These times are atypical, however. The key question for investors, then, is whether this is a sign of the times or a sign of things to come.