More mature companies Mattel, Inc. (NASDAQ:MAT) and Hasbro, Inc. (NASDAQ:HAS) both pay large dividends, 3.40% and 3.50% respectively, for those who might be scared of a more volatile and growing company like LeapFrog. This is the time to buy toy companies as Fellow Fool Rick Munarriz attests if you are looking for upside, as the holiday season accounts for the majority of toy purchases.
Last year LeapFrog took four of the top ten selling toy places, including number one, with Mattel, Inc. (NASDAQ:MAT) only taking three spots and Hasbro, Inc. (NASDAQ:HAS) two according to The NPD Group. Sun Trust Bank analyst Michael Swartz fully believes that the Ultra will be one of the hottest toys this season, because he says it is getting support from big box retailers Wal-Mart and Target.
Downside risk
There is still risk to the downside with LeapFrog. Although it reported a 16% increase in net sales in the second quarter (not including Ultra) in what is typically a weaker quarter for toy companies, rival Hasbro, Inc. (NASDAQ:HAS) is partnering up with several companies like Dreamworks, Zynga, Disney, Electronic Arts, and others to bolster its digital platform. Hasbro’s Beyblade Metal Fusion toy earned number two spot on 2012’s top selling toy list.
Meanwhile, Mattel, Inc. (NASDAQ:MAT)’s very popular American Girl doll franchise has been the savior of the company, offsetting weakness in Barbie sales quarter after quarter.Last holiday season, those aforementioned top selling Mattel spots were from the evergreen Hot Wheels and Monster High, a new addition to the Mattel lineup.
Mother’s little helper
Frankly, I think all three will prosper this holiday season, but Mom may feel torn between buying the educational toy and the “I want that!” toy. Here’s hoping for LeapFrog shareholders that she does the right thing, even as CFO Ray Arthur said on the second quarter call, ” We remain cautious on the overall consumer environment.”
LeapFrog is a mother’s darling because not only does it keep the tots safe from online stranger danger and inappropriate content, it also teaches and keeps the little ones entertained. LeapFrog will make investors even happier with its razor and blade business model, insider buying, and 16.20% net margin.
Mattel and Hasbro are worthy stocks, but their upside will be more limited, although both have sustainable yield.
The article Making Moms Happy Will Make You Richer originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends LeapFrog Enterprises. The Motley Fool owns shares of LeapFrog Enterprises.
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