Is Mattel's 7.25% Yield Sustainable?

Mattel (MAT) stock has been on a consistent downward trend over the last 52 weeks. Close to a 52-week low, Mattel shareholders have lost 30% of their investment in the last year. The decline has created an increased dividend yield of over 7.25%. An examination of the financial metrics justifies the decline of shares; however, it may support the large dividend and create an opportunity for income investors.

Mattel’s earnings have been disappointing. For three consecutive quarters, and five of the last seven earnings reports, Mattel has missed earnings expectations. Mattel has been dealing with earnings headwinds for quite some time. Over the last seventeen quarters, Mattel has only four quarters of earnings growth. One leading cause to the earnings decline is a lack of revenue growth, which has shown a similar correlation to earnings growth over the last four years.


In terms of earnings and dividend sustainability, Mattel’s payout ratio can give investors the best indicator of its ability to pay shareholders. Mattel’s earnings are highly seasonal, so a trailing twelve-month comparison is best. Due to the declining earnings, Mattel’s payout ratio has increased to 172% over the trailing twelve-month period. Unfortunately, Mattel has not had the earnings strength to make dividend payments for seven consecutive quarters.

Despite these earnings problems, analysts have optimism that Mattel will be able to grow its earnings... Read more

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