Is Disney's Stronger Cash Flow Generation Supporting Higher Payouts?

Disney’s DIS strengthening cash flow generation is laying a solid foundation for higher and more consistent shareholder payouts over time.

Disney delivered strong cash flow momentum in fiscal 2025, with cash from operations up about 30% year over year and free cash flow growing roughly 18%. This improvement supported a 50% increase in the annual dividend to $1.50 per share and a doubling of the share repurchase authorization to $7 billion for fiscal 2026, signaling confidence in the sustainability of cash generation.

A key driver of this improvement has been the sharp turnaround in Disney’s Direct-to-Consumer business. In fiscal 2025, streaming generated $1.3 billion in operating income, marking a significant reversal from the multibillion-dollar losses recorded just three years ago. This shift has materially reduced cash burn and strengthened overall free cash flow durability. In parallel, the Experiences segment continues to provide a stable, high-margin cash flow, generating a record $10 billion in operating income to support both shareholder returns and reinvestment.

Looking ahead, management has indicated that the most capital-intensive phase of investment is easing. As Disney's heavy investment cycle moderates, improvements in free cash flow visibility are becoming more apparent. With underlying operating cash flow growth in the high-20% range and guidance of approximately $19 billion for fiscal 2026, the company appears well positioned to sustain higher dividends and accelerated buybacks supported by durable cash generation.

Comparing Cash Flow Strength: Disney vs. Rivals

Warner Bros. Discovery WBD has strengthened its cash flow through tighter cost control, stronger studio results and a streaming turnaround. In the third quarter of 2025, WBD produced $701 million in free cash flow even after major separation costs, backed by rising Streaming and Studios EBITDA and steady linear networks. Competitive advantages include its deep content library, improving streaming profits and lower debt. Compared with WBD, Disney still offers broader diversification and longer-term cash flow stability.

Netflix NFLX demonstrates clear cash flow superiority through its pure-play streaming model. In the third quarter of 2025, Netflix generated $2.7 billion in free cash flow and expects about $9 billion for full-year 2025. NFLX benefits from high margins, global scale and rising ad revenues, supporting steady cash generation. Compared with NFLX, Disney has broader businesses but faces more volatile and capital-intensive cash flows.

DIS’ Share Price Performance, Valuation & Estimates

Disney shares have fallen 2.5% in the past three months compared with the Zacks Consumer Discretionary sector and the Zacks Media Conglomerates industry’s decline of 5.4% and 7.3%, respectively.

DIS’ 3-Month Price Performance

From a valuation standpoint, DIS stock is currently trading at a forward 12-month price/earnings ratio of 16.19X compared with the industry’s 17.76X. DIS has a Value Score of B.

DIS’ Valuation

According to the Zacks Consensus Estimate, Disney’s earnings are projected at $6.58 per share for fiscal 2026 and $7.33 for fiscal 2027. Estimates for fiscal 2026 earnings are down by a couple of cents over the past 30 days, while fiscal 2027 projections have declined by 4 cents.

DIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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