In late July, Rhode Island-based Hasbro (NYSE: HAS) reported lackluster second-quarter earnings, with revenue down 6 percent and earnings down 12 percent. Dismissing the stock would be premature, though, as Hasbro has a lot to offer.
Even in the lackluster quarter, revenue in its Games category gained 19 percent while its Girls category surged 43 percent. (Meanwhile, Mattel’s Barbie line has been posting successive sales declines.) The Boys category dropped 43 percent, but may get some relief via the renewal (through 2020) of Hasbro’s contract to license thousands of Disney-owned Marvel characters (such as Spider-Man, the Avengers and Iron Man), as well as the Star Wars brand.
Hasbro is aiming to keep up with the times, having recently spent $112 million for 70 percent of the mobile game company Backflip Studios. It has also licensed many of its games (such as Monopoly and Clue) to video game-maker Electronic Arts. Hasbro is also a partner in The Hub, a TV network.
The stock recently offered a 3.6 percent dividend yield, with its payout having doubled over the past five years. The company has recently upped its stock-buyback plans by $500 million, which will reward shareholders by spreading its profits over fewer shares. Are you game for Hasbro?
Ask the Fool
Q: I’ve saved $500 and want to start investing in stocks. What should I do? – E.R., Evanston, Ill.
A: First, be sure you have an emergency fund ready, with at least several months’ worth of living expenses. Next, take some time to read up on investing. Perhaps start with “The Motley Fool Million Dollar Portfolio” (HarperBusiness, $16) or John Bogle’s “The Little Book of Common Sense Investing” (Wiley, $23). You can learn more about good brokerages at broker.fool.com.
My dumbest investment
My dumbest investment was in the dry bulk shipping company DryShips. I believed its story for two years. That has been my biggest loss, and one I’m not going to forget. – T.H., online
The Fool responds: DryShips has had many believers over the years and still does. Its stock has been roughly halved, on average, in each of the past five years. The lesson it offers is to look closely at many factors when evaluating a company. Its revenue has been growing in recent years, but its bottom line has been in the red. Its share count has been rising, too, diluting the value of older shares. Its fleet is not as young and fuel-efficient as those of some of its peers. The company’s debt load has more than quadrupled over the past few years, which doesn’t bode well, given its negative free cash flow.
But it’s also worth keeping in mind that the dry bulk shipping business is a cyclical one, and thus business is likely to pick up in coming years. Still, investors can likely find less risky and more compelling stocks.