Mattel (MAT) Stock Analysis

Do you know what Hot Wheels, Matchbox Cars, Barbie, Polly Pocket and American Girl have in common?  They are all owned by a company called Mattel (MAT) and I am here to dive into this playful stock to see what bin of hopefully positive findings come from it.  They are one of the world’s most renowned toy products seller and their portfolio is very expansive.  Let’s take a look…

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From using our Dividend Stock Screener attributes, let’s analyze Mattel:

Dividend Increases: When it comes to dividend increases – they have done this since the glory year of 2002 – back when they were a once a year dividend payer at a nice “heavy” clip of $0.05 per share!  Hold your WWE wrestling figures on that one!  However, they switched to quarterly dividends in the year 2011 and now are paying $0.38/quarter for an annual amount of $1.52 per year, a HUGE jump from the $0.05.  I would confidently say that 12 years of dividend growth isn’t too shabby and it’s nice knowing they’ve done it 10+ years.  The 5 year dividend yield rate is approximately 3.72%.  As of market close on Friday, the current yield is 3.88%, so they are yielding larger than their historical 5 year yield, which shows a sign of value.

Brief Q1 Background: They had a rough first quarter, as total sales were $50M below last year’s first quarter, and actually showed a net loss for the Q as well.  This is due to cost cutting on their Mattel owned inventories and attempts to clear out of old inventory.  From the 10Q “From the commencement of Operational Excellence 3.0 through March 31, 2014, Mattel has realized approximately $76 million of  cumulative gross cost savings. Mattel continues to be on track to realize approximately $175 million in sustainable cumulative gross savings by  the end of 2014.”  I believe this is highly beneficial for Mattel as they continue to go through the consumer spending cycle which is new in a sense with the given economic conditions.  However, with them having realized approximately $76M already out of their cost savings plan of $175M from Q1 alone – I am betting they will hit their goal, and potentially exceed it.

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Price to Earnings (P/E) Ratio:  Current price as of market close on July 11th = $39.13.  Diluted earnings per share at 2013 = $2.58 and analysts are estimating $2.43 this year, with a $2.72 estimate next year.  If we average current forecast with prior year = $2.50 rough figure to use.  $39.13/$2.50 = 15.65.  This is below the S&P on average and is also less than Hasbro’s P/E of 22.  This falls within our screener, and provides a “Green Light” here, we will see if the hot wheels on this stock can roll further to the next screens.

Dividend Yield: Again, we like to see the dividend yield above the S&P 500 as a whole, which currently is at 1.90%.  Therefore, Mattel is more than double that.  With 12 years, I am sure they are suited to raise the dividend further this year as well. 2nd Quarter results should paint a pretty picture of what earnings will be like the rest of the year, but 4th Quarter – being with Toys and Holidays is the ultimate quarter to see.  The yield of 3.88% is very solid and is approximately my overall dividend portfolio.  The cyclical consumer area is something I don’t own too much of and the competition is not as heavy with Hasbro being the more competitive player.  However, based on math alone – the yield gets a check mark here as well.  “Green Light”

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Payout Ratio: Given the average of the estimate this year and earnings last year, with let’s say $2.50, the total dividend at $1.52, they are just at 60.80%.  This shows they don’t give out all their earnings to shareholders and keep some for themselves to reinvest.  I would say I am okay on this one, as earnings should be stronger given the large cost cutting measures for the FY 2014 and beyond.  I would say “Green Light” here as well.  Fisher Price, DC, Scene-It, Scrabble, Spongebob… the list of toys out there for children all over the global should provide the cash to cover the dividend.  I’ll rev my Power Wheels to the conclusion.  “Green Light”

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Conclusion: Interesting play here.  I want to see second quarter results to see what earnings were like, further cost cutting measure and revenue from certain areas of the world.  I think there is absolute value here, they are down close to 18% YTD (one of few companies who are down) and have risen dividends for quite some time.  Mattel has the brands that we all know and loved as a child – and with the population not slowing down – toys are always in, especially with new movies, characters, etc.. that Mattel can spin into a toy, as they have done in the past (Disney Movies (Toy Story, etc).  Though I don’t think it’s a Sure Fire into a huge position here, I would be curious to see what a $1K-$1.5K would do for the portfolio.  I’ll have to review come 2nd Q earnings and we also have a month and a half before their next Ex-Dividend date.  Stay Tuned!  What was your favorite toy as a child?  Were any owned by Mattel?  Those that have children – any of them have toys that are Mattel products?  I loved the hot wheels, that’s for sure.  I believe I still have a few in the box… thanks for coming by!  Would you buy this stock?  Always curious Readers!

-Lanny

 

DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.
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25 thoughts on “Mattel (MAT) Stock Analysis

  1. My house is full of Mattel toys! Their profits and markups must be huge due to everything made out of plastic. pretty decent yield and increases. Well worth a look. Thanks for sharing!

    • AG,

      Nice look! There you go, it’s funny how we can go around and look at the products that we own/use on a periodic basis and what company is the grand holder of that! Always a nice little “extra” technique to use when buying a stock. We’ll see what happens when 2Q earnings are released, very curious on the savings initiative, as well as sales. Thanks for stopping by!

      -Lanny

    • Living@Home,

      I see what standpoint that comes from – children now have an even shorter span of when a product is “in” or what age group/cycle of what the “in” item is. I need to see if fundamentally the company can continue to perform, have strong earnings, pay & raise their dividend – let’s keep a look out for the 2nd quarter earnings, I believe the earnings release is the 17th, stay tuned!

      -Lanny

  2. My house is full of mattel toys/barbies.
    A stock I didn’t look at (yet).
    Thanks for the analysis, i’ll keep this stock in mind.
    Cheers,
    Pollie

    • Pollie,

      Thanks for the stop by! Exactly. I was at my family’s home yesterday and also looked around. I saw: Toys Story old toys, my sister’s old American Girl dolls, Barbie’s she used to own and hot wheels cars on one of my brother’s old dressers. Then the WAM effect came – I need to look into this stock more! We’ll see what happens once we know more info, but with the stock being down close to 18% and the yield over it’s 5 year historical average – it’s interesting. Thanks Pollie!

      -Lanny

    • Dutch,

      Awesome! What points did you buy it on – in terms of “reasoning”? What was the “ah-hah” moment for you to buy it? I may be adding soon, we shall see. Very excited though.

      -Lanny

      • Hi Lanny, MAT was on my watchlist. I pulled the trigger when I thought it was time, that was near it’s 52wk low. I like the dividend and the growth. I think people will still buying this product over 100 years. I only have a small position right now but I am planning to buy more!

        • DD,

          Thoughts right now after earnings? Declining around the $36 mark? Think they are in a position to rebound as a company going forward? I was hoping their savings initiative would have increased their net income more this quarter. Definitely am curious about where the stock is at right now.

          -Lanny

  3. MAT looks good but my son seems to gravitate towards Hasbro products (Transformers, Star Wars, Nerf, etc). HAS has a good dividend yield but seems overpriced at the moment.

    – Dear Dividend

    • Uh oh the Hasbro products! I did look at them for a competitor perspective and I agree – overpriced with a pretty low yield – might as well do the S&P 500 if that’s the case. I’m sure I’ll have a post upon the purchase of this stock if it happens. It’s interesting though since I rarely dig into consumer cyclical stocks. Curious to see what happens in the next few weeks. Thanks for stopping by!

      -Lanny

  4. Hi Lanny,
    Great analysis on MAT there! I had Matchbox cars as a kid growing up and thought they might even be worth something as a collectable one day. And then my 3 year old nephews found them twenty years later and held an impromptu demolition derby. That said, I’m sure a stock of MAT back then would have been a much better investment!
    Definitely something to consider when I roll around to the consumer sectors again. MAT should be a stable pick – at least until Apple decides to produce an iToy!
    Thanks for posting and best wishes,
    -DL

    • Div Life,

      Thanks for stopping by! I appreciate the post – I know all about the hand me down toys just to see them being “abused” haha, but as long as they’re happy and having fun? (Second thought.. I should probably look up online to see how much some of these old toys are worth… I think our old WWF figures are worth quite a bit haha). If Apple decides to come out with an iToy, that’ll be the end of any other product trying to make anything we use outside of Apple! Thanks again for stopping by, talk soon.

      -Lanny

  5. actually, I was thinking that Star Wars would move over to Mattel now that Disney purchased the rights. Mattel and Disney have been partnering on toys for years. Its based on that, and the new movie due out, that I am considering this stock.

    I am also looking at AT&T. The divi growth is weak, but I like their prospects with Uverse and they have a nice yield. I plan to purchase the one that falls the most this week…. its that close of a tie to me.

    • Tulip,

      Very interesting points to make. I didn’t know that Star Wars would move over, now that Disney purchased the rights. Could be an interesting play. I am still monitoring them right now as they had a weak quarter.
      As with ATT- great yield and purchasing direct tv should only only help synergies, cross selling and R&D. Slow growth in the yield but are strong payers. Let us know what you do, thanks for checking it out!

      -Lanny

      • to be clear, Hasbro retained toy rights to marvel and star wars. However, Mattel did create a hot wheels Darth Vader car packaged in the light saber for comic-con. So, maybe for new characters or some other tie in? If I was Disney and Mattel I would be looking to make something happen.

          • hey guys, wish me luck. I went with T today on the downward (over) reaction to the quarterly results. I feel its a good safe place for my money that will earn some dividends while waiting for better opportunities and with little downside. time will tell. Still like MAT, though and good luck to you all.
            t

          • Tulip not a bad move. The ATT stock should provide you a nice boost to your dividend income. Just hope you don’t have their uverse service! Internet has been down for days at my house and they are only crediting me $20 for the hassle! In all seriousness nice purchase with an attractive yield. Cheers!

            -Lanny

  6. There are several reasons to consider Mattel but my two biggest reasons are 1) it is very undervalued (based on Graham and ModernGraham’s valuations) and trading close to 52 week lows and 2) toys aren’t going anywhere.

    Toy companies will probably have trouble keeping up with rapidly changing technology in the near future but the fact is that Kids. Want. Toys. Watch any children’s tv channel (Disney, Nick, etc) and there is a non-stop onslaught of commercials being pumped into kid’s brains.

    If I do buy I will be a long term holder. Millennials are approaching parenting ages. I’m not sure exactly when the next wave of children will be coming but I can be very sure it’ll be in the next 10-30 years.

    It may not have the same demand for all ages like Coca-Cola or Johnson & Johnson does but there is an extreme demand for a certain age group and I expect that demand to grow in the long term.

    • Right Foot,

      Thank you for stopping by first off. I hope that you are right with your statements! I do find it hard to believe to see an era where children no longer use toys. It just doesn’t seem like that will happen. I’m not sure with the population growth domestically of children as I think our trend here in the states is less children per household but globally children I’m sure are on the rise. It’ll be interesting to see if Mattel can transfer into more tech with their branding. We shall see! Thank you for stopping by again! Let us know if you scoop some up!

      -Lanny

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