Is Mattel a Dividend Toy Story?

With the release of Toy Story 3, Mattel (MAT) is currently receiving a lot of investor attention. The stock currently commands a P/E ratio of 13.6, and offers an above-average dividend yield of 3.4%. Mattel only has 22% debt on the balance sheet and generates strong, albeit inconsistent, cash flows. At first glance this all sounds rather attractive for the conservative investors seeking dividend income, however, the story is not as sanguine when reviewing Mattel's history. It's a simple and undeniable fact that dividends are a function of earnings. For short periods of time a company can maintain their dividend during a temporary earnings interruption. Over the longer term earnings must manifest in order for the dividend to be safe. The operating history of Mattel, as it relates to its earnings and dividend record, offers a convincing example of the validity of the relationship between dividends and earnings.... Read more

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