Toy Stocks Rock, And Dividends Are Competitive
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Toy stocks have rolled up gains year to date, the industry popping up 7% even as the indexes corrected.
Analysts are split on where toys go from here. Some fear inventories have built up at the retail level. If so, that could hurt first-quarter sales and margins.
Others say toy stocks are poised for growth, particularly as the market looks ahead to 2009.
Income investors don’t really have a dog in this fight.
It’s enough to know that the group has some long-term players with solid fundamentals.
Besides, an answer will come soon enough: The two biggest players will report Q1 results Monday.
Hasbro () sports a Composite Rating of 98, indicating it is stronger than all but 2% of the market.
Its EPS Stability Rating is 10, a respectable mark on a gauge that runs from 1 (the most stable) to 99 (the most erratic).
While analysts expect a 1% dip in earnings this year, they see a 9% gain in 2009.
Pretax margin was 13% in 2007, the best in at least nine years.
Hasbro’s dividend yield is 2.6%, which represents about 40% of projected 2008 earnings.
The midcap company holds strong brands, including Play-Doh, Transformers and Monopoly.
Mattel () carries an EPS Stability Rating of 7.
The three-year earnings growth rate is 10%, and the Street expects 16% this year.
The dividend yield is 3.6%, about 45% of projected 2008 earnings.
Pretax margin was 11.8% in ‘07. In eight previous years, four had higher margins (up to as much as 15.5%) and four had lower margins (as low as 8.7%).
Mattel has licenses and brands with legs, including Hot Wheels, American Girl, Barbie, High School Musical and Dora the Explorer.
Recalls of some toys over safety concerns bumped up its costs.
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