Following my analysis on Mattel (MAT) and Hasbro (HAS) from last week, I’m closing this toy stock series with the most famous company in the eyes of children: The Walt Disney Company (DIS).

Note: The stock is currently showing a dividend yield of 1.14%. This definitely does not fit my Dividend Growth Investing Model. But the company has recently started to increase its dividend and it makes a great comparison to Mattel and Hasbro who are pretty much alone in the toy industry paying distributions over 3%.

Disney (DIS) Business Description:

If you have been hiding under a rock for the past 80 years, you may ignore that Disney is THE reference for family entertainment. The company is divided into four sectors:

#1 Media Networks (ABC Family, ESPN, Disney Junior, etc)

#2 Parks & Resorts (you need to visit one in your life)

#3 Studio Entertainments (Pixar, Walt Disney Pictures, Marvel banners)

#4 Consumer Products  (Mickey Mouse, Cars, Disney Princess, Winnie the Pooh, Toy Story, etc, etc, etc)

Founded in 1923 by Walt & Roy Disney as The Disney Brothers Cartoon Studio, Disney is today the world’s largest media conglomerate in terms of revenues. Disney has recently hit several home runs with the acquisition of Marvel where they pump a Heroes movie out every six months. After the huge box office success Avengers in 2012, Disney is coming back this year with Iron Man 3 and Thor – The Dark World. This is not to mention their animation studios produced Brave, Frankenweenie & Wreck-it-Ralph (which I really liked!) all in the same year.

The ability to generate important movie success is amplified tenfold by their talent to produce fifty-six-billion of connected consumer products. As it wasn’t enough, Disney bought the license to “close” the Star Wars story with the “last” trilogy.

DIS Stock Graph

DIS Dividend Growth Graph

As I mentioned at the beginning of my analysis, DIS is not known as a super powered dividend stock. With a small yield of 1.14%, it could never be part of my portfolio. However, the recent dividend payout growth is interesting if management keeps it this way. The dividend growth over the past 5 years is at 16.47% while they made a big jump last year as per the following graph:

Most importantly, Disney shows they have huge room to increase their payout in their future with a current payout ratio under the bar of 50%.

But don’t get me wrong, with their massive projects, Disney requires a lot of liquidity to fund them and apply their magical marketing recipe. If I had the choice, I think I would buy the Disney marketing recipe over Coca-Cola’s magic formula .

The Company Ratios and Financial Info:

When I look at the numbers, I can’t be disappointed. Both sales AND profits are up while the company boosts its dividend. You can even go back ten years and still see an awesome growth in revenues:

Same story with the earnings:

We can see that after the economic crisis of 2008, they rapidly recuperated their swing to boost 2011, 2012 and now 2013 sales and profits. The company is definitely solid.

DIS Stock Technical Analysis

DIS is currently trading on a strong uptrend. It might be a good time to acquire this stock. Click here to get a free stock analysis report on DIS.

Disney Upcoming opportunities and dangers:

With such a large brand portfolio coupled with multiple acquisitions, Disney counts on several opportunities to continue to grow. Since Americans have cleared a part of their debts during the past three years, chances are they are more inclined to spend more in the upcoming years in entertainment.

The other point that convinced me about the company was my personal trip to Disney World last winter with my three kids. Everything was perfect. I mean EVERYTHING. Their ability to think about the unthinkable and make the customer experience his best family vacation souvenir ever is almost unreal. A company with such dedication to detail is definitely a keeper for a portfolio.

As for the dangers, we often mention their media network division to be at risk seeing possible cable erosion. This could be a possibility if Disney’s brand wasn’t as strong in our minds. Kids will want to see Disney’s cartoon and movies while adults will always be looking forward live sports on TV through ESPN.

The downside? A relatively high P/E ratio currently sitting at 20. Considering the company’s growth potential in the upcoming years (do I have to mention how much money you make on a Star Wars Episode?), this is a calculated risk. Mind you, several great stocks are trading around 20 P/E ratio right now. It might not be the best time to buy the stock, but I don’t think there will be a major pull back either.

Final Thoughts on Disney

The more I read about Disney, the more I’m seduced by this company. It bites me that it doesn’t pay a higher dividend… But I’m still considering this stock as it has been paying a dividend for the past 14 years. Based on my analysis, DIS looks like a great complement to my portfolio. Still, I’m not making any trades at the moment.

Disclaimer:  I do not hold shares of MAT, HAS or DIS

I hope you all have a great long weekend! Any plans?

1. Building Wealth Through Dividend Investing @ Dividend Ladder.

2. International Allocation through Conglomerates @ The Passive Income Earner.

3. Reinvesting Dividends @ DGSI.

4. Is Coca-Cola the perfect dividend paying stock? @ My Own Advisor.

5. What advice I would give my 23 year old self @ Retire by 40.

6. Rackspace (RAX)… Buy, Sell or Hold? @ IS.

7. One Year Older, One Year Closer @ Dividend Mantra.

8. T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis @ DGS.

9. Time To Bust Some Financial Myths @ Financial Uproar.

10. IFON You Up With A Deal @ Barel Karsan.

On Monday, we looked at the toy industry with Mattel (MAT). Following up on this series, we will check out another important player in the industry; Hasbro (HAS). While Mattel is part of my Best Dividend Stocks for 2013, Hasbro was part of my selection for 2012. The company has been up by 32.34% this year and was up by another 12.57% for 2012. After a gain of almost 50% in 17 months, is there any more room for profit of have you missed the train?

Hasbro (HAS) Business Description:

Hasbro is a worldwide leader in children and family entertainment. It is mostly known for their numerous toy brands such as Playskool, Tonka, Milton Bradley and Parker Brothers. They are the 2^nd largest toy company behind Mattel and have several trademarked franchises such as Transformers, Star Wars and Marvel action Heroes. Since they can’t stop making Marvel Heroes movies and the Star Wars licence was recently purchased by Disney for additional movies, we can expect Hasbro to head back to its peak at the end of 2011:

Their business strategy is based on a continuous flow of new partnerships to make innovative toys in the industry. Back in the 80s, Hasbro had made some strategic moves through the acquisition of Milton Bradley (who knows Monopoly?) and the creation of Transformers. End of the 90s and beginning of 2000s, Hasbro had acquired the licences for Star Wars and Marvel toys. We can deduct that most of their sales growth will be attributed to the movies for which they have the licence for complementary products.

Hasbro was quite aware that it was a bit risky to gamble their revenues based on Hollywood and their mood swings. This is why starting back in 2008, they focused on creating or innovating within their own brand. Some of their flagship owned brands such as My Little Pony and Magic The Gathering were pushed to another level to make sure that Hasbro could have great years even if the movie industry sucks.

As at 2012, Hasbro had the following market shares:

USA 12.7%

Western Europe 8.3%

Mexico & Brazil 11.5%

Their most recent investor presentation shows a 10 year net  annual revenues growth of 4% annualized return. But if you look closely at the graph, you notice revenue stagnation since 2008.

HAS Stock Graph

HAS Dividend Growth Graph

One snap shot at the dividend payout for the past five years and you will fall in love with the stock:

But a second look at the payout ratio rises a red flag:

Due to a difficult year (even Hasbro management admits it), the payout ratio has gone up compared to its previous year. 2013 seems brighter since it already dropped from its peak of 2012.

A look at their Earnings Per Share also tells me the same story: Sales and profits have a hard time growing in this tough economic period:

The Company Ratios and Financial Info:

While the dividend metrics look great for now (high dividend growth, relatively high dividend yield and payout ratio back under 60%), sales stagnation worries me.

HAS Stock Technical Analysis

HAS is currently trading on a strong uptrend. It might be a good time to acquire this stock. Click here to get a free stock analysis report on HAS.

Hasbro Upcoming opportunities and dangers:

Hasbro has a strong position in the US with 52% of their sales coming from their main market. They also did a strong incursion in the Emerging markets with over 10% of their revenues coming from the fastest growing countries of the world. Nonetheless, this doesn’t seem enough to keep Hasbro growing.

The company has aggressively given back a lot of money to its investors through share repurchases and the major dividend growth policy. Based on the classic financial theory; a company is paying dividends when it doesn’t see growth opportunities. I think Hasbro should maybe slowdown on the dividend growth and focus on creating more innovative toys. In my opinion, this company is still a little bit too much linked to the movie industry.

I guess the upcoming heroes movies and the next Star Wars Trilogy are both great news for both Hasbro and its investors!

The reason why I had picked HAS for 2012 was based on its record year of 2011. While the stock did well, the sales and earnings dropped throughout the following years. However, the first quarter of 2013 is showing growth in revenues, profits and EPS. This is probably why the stock has gone up, doped by the overall bull market feeling.

Final Thoughts on Hasbro

If I was a Hasbro stock owner, I would probably hold on the stock and watch the next quarters carefully. If 2012 was simply a bad year in the economic cycle and 2013 shows growth, I would be quite optimistic with regards to the future of the company. However, if sales still stagnate, I think it will be time to cash out the money and run.

What do you think? Are you a Hasbro fan?

Disclaimer: I do not hold HAS or MAT in my portfolio.

The month of May is starting out strong on the stock market as most investors are patiently waiting for a correction. Since it’s spring time and we are all looking to spend more time  playing outside, I thought of doing a small analysis series of toys & entertainment dividend stocks. Today we start with Mattel (NASDAQ: MAT), a stock showing a year-to-date return of +23.84% as at Monday May 6^th before the market opening. This stock has been selected at the beginning of the year to be part of my book of The Best 2013 Dividend Stocks.

Mattel (MAT) Business Description:

Mattel is one of the biggest toy manufacturers, marketers and distributors. It has an impressive portfolio of brands including all-star names such as Fisher-Price, Little People, Barbie, Hot Wheels, Polly Pocket along with several Disney, Comic Book and Cartoon characters and related products.

Strong from a record year in terms of sales for 2012 (over $7 billion), Mattel continues to grow its numbers year after year. The biggest part of the growth comes from its “American Girl Brands”. While Barbie is slowing down, Mattel showed up with the American Girl! Since Mattel’s business model sells most of their toys at an affordable price, they also did well in international markets. China, Brazil and India continue to support the international sales.

The management team is led by a cool motto: “My motto is to be happy, but never satisfied”. I think all management teams should keep this in mind!

MAT Stock Graph

MAT Dividend Growth

The dividend payout continued to grow over the past 5 years including some important dividend increases recently (from $0.31 to $0.36 in early 2013). With a payout ratio under 60% (55%) we can expect Mattel to continue increasing its dividend in the future.

When I look at the EPS graphs, you can see a strong uptrend in the past three years:

The Company Ratios and Financial Info:

The company shows steady growth in terms of earnings, sales and return on investment. Considering the current market, the P/E ratio is not too high (17.73) and the forward P/E ratio is at an attractive value (14.57). These indicators tell me there might be more room for stock appreciation if Mattel keeps delivering strong numbers.

MAT Stock Technical Analysis

MAT is currently trading on a strong uptrend. It might be a good time to enter this stock. Click here to get a free stock analysis report on MAT.

Mattel Upcoming opportunities and dangers:

Strengths:

In October 2012, Mattel topped estimates and even raised Holiday sales forecasts. With a very strong brand portfolio combined with an increasing consumer confidence, MAT is going through the Holidays with a smile. With its world leader position, Mattel will continue to rack-up the sales in 2013. The dividend payout ratio is low and the 5 years dividend growth (12.28%) shows a strong dividend policy.

What I really like about this company is its ability to grow its sales and profits during a tough economy. Americans have cut back their expenses to pay off their debts while the unemployment rate rages in Europe. Nonetheless, Mattel continues to sell toys worldwide with a smile. This tells you a lot about a company business model’s strengths.

Weaknesses:

The switch from traditional toys to electronic definitely affects MAT. The traditional toy market and most important retailers (such as Toys’R’Us) have been facing slow growth while computer games, gaming consoles and tablet games have been increasing significantly. It will be interesting to see how Mattel will react to this “new” substitution product in the future.

They continue to seek additional partnerships with comic books, movies and other platforms. I think the key issue with Mattel will be how great they will do in a web 2.0 environment in the future. Since their brand portfolio is very strong and diversified, it’s more a matter of switching distribution platforms.

Final Thoughts on Mattel

There is definitely a reason why Mattel was not only selected to be part of my The Best 2013 Dividend Stocks Book but are beating the S&P 500 so far this year. It’s because MAT is showing strong financial metrics. This is an easy business model to understand as kids will always play with toys and Mattel has proven its ability to go through recessions without hurting its balance sheet too much.

Considering its stability and recent focus on increasing its dividend payout, I think Mattel is an interesting stock for my portfolio and meets my Dividend Growth investment model criteria.

In our following posts, we will take a look at Disney (DIS) and Hasbro (HAS).

Disclaimer: I do not hold MAT shares at the moment of writing this article

What did you miss from the past week?

1. Updating My Dividend Watchlist @ MJTM.

2. Have You Put Your Chips On The Web Ecosystems Yet? @ IS.

3. Asset Allocation – Retirement Ready Part 2 @ The Passive Income Earner.

4. Portfolio in Action: Purchased Lorillard Shares @ DGSI.

5. Dividend Income Update – April 2013 @ Dividend Mantra.

6. Pay For College With Dividend Income @ Dividend Ladder.

7. hhgregg Management Rips Off Shareholders @ Barel Karsan.

8. The Most Common Excuses For Not Launching Destroyed @ SFN.

9. Nike, Inc. (NKE) Dividend Stock Analysis @ DGS.

10. Carnival of Personal Finance – Happy Days Are Here Again Edition!

It’s fun to see how a serious field like investing comes with these semi-astrological predictions…

There is an old saying telling investors to sell in May and come back in October. This is the result if you follow the “Sell in May and Go Away” along with “Buy back on Saint Crispin’s Day” which is in late October.

Some people can say it’s as good as fortune tellers’ stories but there is one thing that tickles me; there is some pretty strong data to support it! The most interesting graph I have found was produced by Walter J. Zimmermann Jr. from United-ICAP. It clearly shows that an investor that bought only from May 1^st to October 31^st (so doing the opposite of the old saying) loses money over the past 62 years of stock market history!

On the opposite hand, if you only buy from November 1^st and sell on April 30^th, the investor is making a fortune from 1950 to today. Somewhere in between, someone who’s fully invested no matter what is making money but definitely less than if they would follow this twisted rule:

Source: United-ICAP (pdf document)

Well, even if I don’t believe in technical analysis too much, I wonder how I could believe in this. It’s not like I will get rid of my entire portfolio today just to make sure I don’t lose money over the summer.

Losing on Dividend Growth

The deceiving part of those sell in May believers is that dividend payouts have been ignored in this comparison. I understand why as nobody has the time to track dividend payments over a period of 63 years. Nonetheless, I believe that the dividend investor will benefit from keeping his stocks throughout the years to receive its distributions.

There is also tax implications if you are trading in a non-registered account. However, this doesn’t apply to my personal situation for now.

It’s Not Always True

Just for fun, I’ve decided to pull out some non-scientific data post 2008. I looked at the S&P500 from May to October for 2009, 2010, 2011 and 2012 just for fun. Here’s what I found:

2009 +19.62%

2010 -0.29%

2011 -5.76%

2012 +0.63%

After 4 four years, I’ve cumulated a gain of +13% (total return not annualized). If you add a few dividend payments throughout those months, I would have been a clear loser to ignore these 6 months of the year. On the other hand, 2009 makes a huge difference in the calculation. Nonetheless, I’m pretty sure that the payment of dividends compensate for the loss in 2011 over the long run.

Technically, it is true that there is a lot more money to make from November to April but there are still some bucks lying on the floor for the summer months!

I’m Not Selling but I’m Stop Selling!

I won’t be selling any of my stocks over summer time. However, I’ll put a few stop sell instructions on specific stocks to make sure I cash out most of my profits. The best example in how to use this strategy is definitely on Seagate Technology (STX). After STX last quarterly results (last week), the stock jumped by more than 10% in 2 days. I’m currently showing a paper profit of 66% on this trade (not counting dividends!).

It is very tempting for me to close this trade now, and look for something else to buy. But I hate to leave money on the table and since the company continues to be traded with a very low P/E ratio and pays a juicy dividend, I want to keep riding the stock.

The best way for me to do it is to put a stop sell at $39. Since the stock is now trading around $41, this gives me some room to navigate. If the stock drops under $39, I’ll automatically sell the stock and cash in some nice profit. If it keeps going up, I won’t have to worry.

What about you? Are you selling, buying or holding in May?

Let’s jump right into the links:

1. Spotting the Red Flags of Investment @ The Passive Income Earner.

2. Will You Sell And Go Away? @ Dividend Ladder.

3. Notable Dividend Increases: April 2013 @ DGSI.

4. PepsiCo, IBM and 7 Other Dividend Stocks Raising Their Payouts @ DGS.

5. Freedom Fund Update – May 2013 @ Dividend Mantra.

6. The Pros And Cons Of Living In A Smaller Home @ Retire by 40.

7. Alco-Stores: Large Shareholder Disappears @ Barel Karsan.

8. Facebook (FB), Still A Good Buy At These Levels? @ IS.

9. Carnival of Financial Camaraderie.

10. Carnival of Personal Finance #408 – Disney World Edition.

At the beginning of each month, I make a recap of the dividend yield and ex dividend date of the TSX 60. In addition to this recap, I’ve decided to cover briefly the result of my Best 2013 Dividend Stock Book. This book includes 30 stocks analysis (20 US and 10 CDN) for only $2.99. So far, my results are:

20 US Dividend Stocks: +20.03% (can you beat that?)

10 CDN Dividend Stocks: + 6.11%

If you want to read more, just continue pass the TSX 60 Dividend Yield & Ex-Dividend Date chart…

TSX 60 Dividend Yield & Ex-Dividend Date

Best 2013 Dividend Stocks Results

At the beginning of the year, I’ve made a list of Best dividend stocks for 2013 (click on the link to get my metrics and to see the list). Out of this exhaustive list, I’ve pulled out 30 stocks to be my “favorite” picks among those lists. Those are not stock recommendations and I strongly suggest you do your own analysis and read financial statements. This book is simply a compilation of my own stock analysis for 30 stocks being either held in my portfolio or being on my watch list.

I’ve broken down the result per market:

Best 2013 US Dividend Stocks Results

In the middle of February, I wrote an article about 35 dividend stocks on fire. Those were the most profitable stocks after 5 weeks of trading in 2013. Out of the top 35, I had 5 stocks from my own selection:

Seagate Technology (STX)

CA inc. (CA)

Safeway (SWY)

Mattel (MAT)

Heinz (HNZ)

Now, after 4 months, I have 13 stocks showing stock growth over 20% without counting dividend. While my benchmark continued its progression, my portfolio simply boomed.

The average portfolio is showing an amazing return of 20.03% that is 12.14% over my benchmark (VIG with 12.14%). Oh! Did I mention that my portfolio also produce 0.90% more in dividend yield than VIG? .

What’s interesting is that I now have 9 stocks out of 20 with a dividend yield under 3%. When I first built this portfolio during the Holidays, I only had Abbott showing lower than 3%. This means that the current dividend yield “suffered” from the stock appreciation. However, the dividend yield based on the original cost of purchase is still way above 3%.

If you want to learn more about those companies, you should buy my book for only $2.99:

Best 2013 Canadian Dividend Stocks Results

I’m quite satisfied with my Canadian picks as well. I was struggling to beat my index (XDV with 3.35% so far this year) for the first three months. After April, I have now 6 stocks out of 10 beating the index. CTY and NA are still struggling but their high dividend helps a lot. Telus continues to seek higher summits after splitting not so long ago.

How about your portfolio this year? Are you as happy as I am?

Disclaimer: I hold shares of NA, T (Telus), CVX, INTC, JNJ, STX