Mattel: Increasing Income And Large Cash Supply Make It A Buy

Feb.22.13 | About: Mattel, Inc. (MAT)

Today, I'd like to take a closer look at Mattel Inc. (NASDAQ:MAT). Founded in 1945, MAT is known for brands like Barbie and Hot Wheels. Fortune named MAT in its 2013 'top 100 companies to work for' list. Trading at $40.42, MAT is currently near its 52-week high of $41.31. Its market cap is $13.87 billion, more than twice that of Hasbro (NASDAQ:HAS). The financial data I used comes from MAT's quarterly reports. You can find these here. The graphs were all made by me, using Microsoft Excel.

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Let's start by looking at MAT's Net Income. The graph above shows us, that from 2006 to 2012, MAT has increased Net Income from $592.9 million to $776.5 million. This is an average yearly increase of 4.6%.

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Next, we'll take a look at the EPS and dividend. EPS has gone from $1.55 in 2006 to $2.25 in 2012, increasing by $0.70, or an annual 6.4%. Dividend has grown faster, increasing an average 11.4% a year. Increasing dividend payments have caused the payout ratio to go from 41.9% in 2006 to 55.1% in 2012.

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Current assets for MAT have increased by $705.7 million between 2006 and 2012, going from $2.8501 billion to $3.5568 billion. In the same period, current liabilities only increased by $133.5 million, going from $1.5825 billion in 2006 to $1.7160 billion in 2012. This has caused the Current Ratio, which is current assets divided by current liabilities, to go up from 1.80 to 2.07.

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All things considered, I think MAT would be a good stock to own. Out of its current assets, over $1.3 billion is cash and cash equivalents. This will sustain MAT's dividend increases for a long time to come. With its most recent dividend increase to $0.36/quarter, I think I'll wait for MAT to go down slightly from its 52-week high. If I can buy MAT at $36 or below (It's taken a few dips below this point in recent months), it'll pay me a nice 4% dividend.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MAT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.