Dividend Increase: Activision (ATVI) 2018

Activision Blizzard (ATVI) the company best known for publishing video games like Call of Duty and World of Worldcraft (and don’t forget the glory days of Guitar Hero) announced it’s 2018 dividend increase of 13.33%. This brings the annual dividend to $0.34 from last years $0.30. This also continues the streak of consecutive dividend increases to 8 years. ATVI has been paying a dividend for 9 years. The current dividend yield on ATVI sits at 0.48% based on a closing price of $70.8949.

The 4 cent increase actually tops my expectation by a penny for 2018. It feels good knowing your cash flows are increasing without lifting a finger.

A Look at the Dividend History:

You’ll be hard pressed to find the above info on ATVI’s dividend, as their investor relations site is kind of a joke.  Although the above all inclusive history is short and sweet, the average increase on ATVI dividend sits at 10.83%. This translates to the dividend more than doubling since 2008 at a growth rate of 126%. That average dividend growth rate is slightly double my goal for my entire portfolio and far outpaces inflation. Is there room for this dividend growth rate to continue much longer? How has the stock performed?

ATVI vs S&P500

The above chart goes back 10 years. Clearly you can see ATVI has far outperformed the S&P500. As consumers have transitioned to more digital purchases for their home consoles, this has proven to be a boon for video games publishers compared to the old days of just using brick and mortar. Also, gaming has gone mainstream and lost much of the negative stereotype from back in the day. It also doesn’t hurt that ATVI owns Candy Crush and has a foot in mobile game sales as well.

ATVI Key Stats:

Market Cap: $53.56 Billion

PE Ratio: 196.78

Beta: 0.77

Profit Margin: 3.89%

Total Cash: $4.71 Billion

Totat Debt: $4.39 Billion

Dividend Yield: 0.48%

Payout Ratio: 20.55%

With that low payout ratio, I expect more of the same with regards to the dividend. For  2019, 2020, and 2021 I expect a 10% growth rate to the dividend. The payout ratio has slightly decreased from last year,  and there is still plenty of room for it to grow. It’s hard to say what happens going forward with this company.  Their profit margins have definitely been reduced since last year, but aside from the shift to digital, E-sports looks like it can be a potentially new source of growing revenues for the company.  I’m definitely holding on, but proceed with caution for new entrants in the stock.  Maybe exploring some call options would be a way to go.

The Value of $10,000 Invested Long Term

On 1/4/2010 ATVI closed at $11.30.  Say you invested $10,000 in the stock that day, you would have picked up 884 shares (rounded down).  The current closing price on 2/21/2018 sits at $70.8949, meaning your initial $10,000 investment would now be worth $62,671.09 representing a return of 526% for the little over 8 year time horizon.

If we look at the total amount of dividends received during the time frame (not including 2018, since it has not been paid out yet), you would have received $1480.70 in dividends (without reinvestment).  Factoring in dividends your value in ATVI would be $64,151.79 and a total return of 541%.  There’s serious business in games.

Live without fear, like Leeroy Jenkins:

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