Earn 5% From This High-Dividend Stock
December 6, 2016
MAT Stock Is a High-Dividend Stock That Shouldn’t Be Ignored
With interest rates at historic lows and saving accounts offering little or no interest, high-dividend stocks are a great way to earn income in the current environment.
When it comes to finding a great high-dividend stock, there are many things to factor in to make sure the investment is sound. The first is determining whether earnings are sustainable to continue such a payment. If the company is not earning enough cash to support the dividend, there is a possibility of the dividend being cut.
Another factor to consider is how shareholders have been in the past. Actions do speak louder than words, and the reward history should be considered.
Lastly, investors should review the balance sheet and make sure the company is not debt-heavy. When companies have debt loads that can’t be managed, a dividend cut could be in the future.
I have found a company that would be considered a high-dividend stock and satisfies the factors mentioned above. The stock that would fit this criteria is Mattel, Inc. (NASDAQ:MAT) stock. Mattel is a toy manufacturing company that operates globally. Many of Mattel’s brands are recognized worldwide and include “Barbie,” “Hot Wheels,” and “Fisher-Price.”
I will now go through all the factors mentioned above in terms to owning MAT stock.
In regards to having a constant cash flow, sales have come into the business at a steady rate. Over the past five years, sales have been in the range of $5.7 billion to $6.4 billion. This is great for high-dividend investors because it means the earnings are not volatile.
As for how shareholders have been treated, over the years, they have been rewarded with steady dividend increases. Over the past nine years, the dividend has seen growth of 222%. MAT stock is currently yielding five percent, with the shares trading at $30.42.
Dividends have not been the only method by which money has been returned to shareholders. In November of 2010, Mattel announced a $500.0-million share repurchase program. Share buybacks are the most tax-efficient method of returning cash to shareholders. (Source: “Mattel Announces Additional $500 Million Share Repurchase Authorization; Increase in 2010 Annual Dividend and Switch from Annual to Quarterly Dividend Beginning in 2011,” Mattel, Inc., November 15, 2010.)
Share repurchases also make each share owned worth a greater percentage of the entire company because fewer shares are available for purchase.
Lastly, a look must be taken at the balance sheet to ensure that the debt burden won’t affect the dividend in any way. Specifically, you must look at the debt-to-capital ratio. This ratio takes the total debt on the balance sheet and compares it to the assets of the company. A ratio that is above 50% implies a company is using debt to grow the business, while 50% or below means using the existing assets instead.
In the case of Mattel, the debt-to-capital ratio is approximately 50%. This is in the sweet spot, with the company focused on reducing the debt load, which will in turn lower the ratio. (Source: “Mattel Reports Third Quarter 2016 Financial Results and Declares Quarterly Dividend,” Mattel, Inc., October 19, 2016.)
Final Thoughts on MAT Stock
MAT stock is a high-yielding stock backed by a management team that is friendly towards shareholders. Following the most recent recession, the dividend remained intact and the following year after the bottom of the recession, investors saw a dividend hike. This is why MAT stock remains a high-dividend stock.
A company such as Mattel is one that investors should take notice of, because no matter how the economy is doing, the cash flow will remain sustainable and continue to pay shareholders a high yield.
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
We hate spam as much as you do. Check out our privacy policy. This is an entirely free service. No credit card required. You can opt-out at anytime.
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.
Check out our privacy policy.