Should you invest in toys?
Toy companies pay decent dividends and are expected to raise prices this year without hurting sales.
But toys are a funny thing. Even when prices rise, parents still buy them because they want to keep their children happy. When it comes down to it, parents will sacrifice a purchase for themselves instead of giving up that new toy for their children.
The toy industry is a tough business with very slim margins. It's not for the investing faint of heart. Still, look at the fortunes of the two biggest toy companies in the last two years. Mattel (MAT) has seen shares rise 51% to $32.63. Hasbro (HAS) hasn't had that kind of run -- with shares essentially flat at $36.07 -- but it seems to be coming off a bottom.
Both companies will likely raise prices by 6%, Reuters reports. Sales should hold steady despite the increase.
"What makes these companies attractive is that they tend to be fairly resilient and they throw off buckets of cash," one UBS analyst told Reuters.
Mattel's dividend yield is 3.8%, and Hasbro's is 4.1%.
If you don't want to buy these stocks directly, you might consider a fund that favors them. Reuters notes that Mattel is about 2% of the Principal Equity Income fund (PEIIX), and Hasbro is 2.5% of the Ave Maria Rising Dividend fund (AVEDX).
The toy industry is in the midst of some big changes. Children seem just as happy with an iPad as with an Easy Bake Oven, and there are some very good apps tailor-made for just about every age group.
You could almost count Apple (AAPL) as a toymaker, with all the kid-friendly games and other apps available for iPads and iPhones. The toy industry is fully aware of this, and Mattel is now making products that are compatible with Apple devices, Reuters reports.
The growing interest in phones and tablets is hurting some traditional video-game companies. Nintendo (NTDOY), for example, posted its first-ever annual loss in January.
The surge in digital games isn't enough to threaten the dominance that Mattel and Hasbro have on the toy industry. But times are changing. The maker of the "Angry Birds" line of games wants to go public, for example, and soon toy investors will have many more options.
Regular users are still there, but future users (kids mostly) are finding lots of entertainment on non-Nintendo platforms.
"Apple's a toy company and doesn't pay decent dividends or wages!"
If you are referring to Foxconn the last I saw, that company is NOT apple. Apple cannot be held responsible for what its suppliers pay their employees. I guess by your argument ANY company doesnt pay decent wages since they often buy office supplies from places like Walmart who don't pay "decent" wages. Get a life, get a clue and move on from your petty hate party of Apple.
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These companies won't soar like other plays in the sector, but they make for great income sources.
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