Dear Disney: Don't Throw Your Dividend Away on Content

Income investors don't have much reason to warm up to Walt Disney (NYSE: DIS) these days, and if activist investor Dan Loeb has any say, it may be some time before the media giant restores its payouts. Disney temporarily suspended its semiannual dividend back in May, and Loeb suggests that instead of bringing it back, the House of Mouse should throw all that money into direct-to-consumer content.

The Third Point hedge fund founder argues that the money saved in distributions (nearly $3.2 billion a year based on Disney's previous rate) could go a long way to help the company beef up its digital catalog as it faces off against Netflix (NASDAQ: NFLX) and other digital platforms. It's a noble thought, and no one is going to argue that content isn't king these days. But if Loeb has Disney's ear (its ear Loeb, if you will), can I offer the media icon three simple words of advice? Don't do it.

Image source: Disney.

Source Fool.com