Hasbro’s 3.9% Dividend Yield: Why It Looks Better Before You Unwrap It
Hasbro’s (HAS) looking a bit like a stocking stuffer for last-minute shoppers. After all, you can pick up a share in the maker of Playskool, Nerf, and My Little Pony products for less than the amount you’ll pay for a Doc McStuffins doll from Disney (DIS), as seen in a stock chart.
Hasbro has an attractive dividend yield is based on a steadily rising payout, and one well-affordable for the company. It’s also on sale this season. YCharts Pro says Hasbro’s trading under its historic PE ratio.
Sounds like a great gift, eh? But that’s overlooking some problems in this toymaker’s shop. While Hasbro has some popular products, like the eerie Furby petlike robot dolls, its biggest categories are doing poorly. In its boys division, which was 42.5% of Hasbro’s $4.3 billion in total sales last year, sales were down 12% in the third quarter and 10% in the first nine months of the year.
Meanwhile, the games and puzzles segment, home to Monopoly among others, is its second biggest segment and brought in 27% of last year’s sales. But that has shrunk for three years running. In 2011 it launched a turnaround that includes pushing into digital gaming and making substantial changes to how it markets its games. Since then, its gaming revenues continued to slide in the first nine months of this year, although they were up slightly (less than 1%) in the third quarter.
It’s not easy to evolve. In February Hasbro announced a global partnership with Zynga (ZNGA). That gives Hasbro the chance to develop games and toys based on Farmville and its sister games. But Zynga is not the healthiest of partners.
It doesn’t help that Hasbro depends on movies to move some toys and games. The Hollywood Reporter called Battleship, which was (extremely) loosely based on Hasbro’s board game of the same name, “silly and overly ponderous.” The movie did just ok in U.S. box office sales.
The biggest problem is that kids are tossing aside dolls and blocks in favor of more sophisticated stuff. Check out a typical hot toys list, like this one from Toys R Us. Three of the top 15 gift ideas are tablet computers, and that’s only because they have parents who won’t buy them iPads from Apple (AAPL).
Hasbro has a name for this: “We refer to this as ‘children getting older younger,’” it said in its most recent annual filing. By the sound of things, the toy business is getting tougher as Hasbro’s list of competitors grows to include electronics and video game companies.
So the dividend looks promising, but just make sure Santa knows your risk tolerance.
Emily Lambert, a contributing editor at YCharts, is a former staff writer at Forbes. She can be reached at firstname.lastname@example.org.