Mattel, Inc. (MAT) represents a good value at 16 times earnings with an attractive 3.1% dividend yield and up to 12% earnings growth, and the company is likely to continue that growth as the economy improves, says David Abella, Senior Portfolio Manager at Rochdale Investment Management.
“This is a name that, at 16 times earnings, I think is a good value. It is near the high end of its range, but compared to other consumer companies that have reasonable growth, I think Mattel still represents good value. From a dividend point of view, the yield at 3.1% is attractive. It’s been growing in the low teens, and I think going forward a high-single-digit growth rate is very reasonable. The earnings growth has been in the 10% to 12% range, and topline revenue has been growing in the high-single-digit range. So it’s been a steady performer, a good value name with solid earnings and dividend growth as well,” Abella said.
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Abella also believes that investing in Mattel is a smart way to play the continued growth in economic improvement, as the stock held up well during the financial crisis, and consumers are likely to buy more toys as the economy continues to recover.
“This company was pretty stress tested in 2008 through 2010, and it did hold its sales pretty well. Generally in retail, toys are cut last in the cycle. People will give up other items in retail and try to maintain the toy spending. And the bottom line is, I think that if the economy does continue to improve, people will buy more toys and Mattel will be a beneficiary of that. They are very well poised from a franchise point of view to capture that,” Abella said.
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