Mattel Inc. (MAT) recently announced a new share repurchase program and increased its dividend, which will be changed to a quarterly from an annual basis, beginning 2011.
Mattel received authorization from its board to increase its previously announced share repurchase program by an additional $500 million. The program has no expiration date. Mattel repurchased about 117 million shares of common stock for an aggregate of approximately $2.3 billion since the inception of the program in February 2003.
During the recently concluded third quarter, Mattel bought back 2.0 million shares for $42 million, at an average price of just over $21.49. Year-to-date, the company has repurchased 7 million shares for $153 million, at an average price per share of $21.89.
The California-based toy company has also decided to hike its annual dividend by 8 cents to 83 cents per share. This translates into a 10.7% increase from the prior dividend. The increased dividend is payable on December 16, 2010, to shareholders of record December 3, 2010. Additionally, the company’s dividends will be paid on a quarterly instead of an annual basis from the upcoming fiscal year.
The new dividend brings the forward annual dividend yield as of November 15, 2010, to 3.52%, which inched past the industry average of 3.39%. Mattel’s forward annualized dividend yield also remains ahead of its closest competitor Hasbro Inc.’s (HAS) 2.12%.
The company had left its dividend unchanged since 2007 at 75 cents per share, due to the economic downturn in 2008. We believe resurgence in the macro economy and a stable balance sheet position prompted the company to raise its dividend.
At the end of third quarter, cash and cash equivalents of Mattel were $960.5 million compared with $323.7 million at the end of third quarter 2009. The increase in cash was primarily driven by higher beginning cash balancesand long-term borrowings. We believe the company now has enough cash and cash equivalents to provide optimum shareholder value.
At quarter-end, Mattel’s total non-current long-term debt was $960.0 million, an increase of $250 million year over year, reflecting the recent debt issuance of $500 million.
We appreciate Mattel’s effort to step up long-term shareholder value and believe that an increase in dividend payment along with share buy-back authorization affirms the company’s optimistic outlook and depicts that it is heading toward strong future growth.
Mattel currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
HASBRO INC (HAS): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
Zacks Investment Research
