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When it comes to bouncing back, Hasbro (NYSE: HAS ) is the Superball of toymakers. The company has held up well through tight-fisted economic times in the past, probably because Mr. Potato Head purchases for the kids are one of the last things penny-pinching families will cut from their budgets.
The company has racked up seven consecutive years of growing adjusted earnings per share, as weaker competitors like LeapFrog (Nasdaq: LF ) have faded. Hasbro didn't fall into the lead-paint recall trap that roughed up peers such as Mattel (NYSE: MAT ) and RC2 (Nasdaq: RCRC ) -- either a stroke of good luck or a result of dutiful vigilance.
The company's rich brands have opened up the door for everything from videogaming to casino slot-machine opportunities. Perhaps the mother of all licensing coups came last year, when the company's Transformers line of action figures inspired a summer blockbuster film from Viacom (NYSE: VIA ) . Between the licensing royalties for the flick, and the boatload of related toy sales that erupted, Hasbro coasted through a 2007 that challenged many of its competitors.
It's the name of the game
Investors can't simply roll the dice on toy stocks and assume that they'll land on a winner. Hasbro and JAKKS Pacific (Nasdaq: JAKK ) are the two recent standouts in this sector.
Unfortunately for income investors, JAKKS Pacific's yield is absolutely zilch. The company also relies heavily on making licensed toys for entertainment properties owned by others. True, so does Hasbro, which has scored well with its Star Wars and Marvel (NYSE: MVL ) licenses. However, many of the company's biggest sellers – like Monopoly board games, Tonka trucks, and Playskool toddler toys – are homegrown winners.
Best of all, Hasbro's payout is far from zilch. Earlier this year, while so many major banks were slashing their dividends, Hasbro came through a 25% hike in its dividend rate. The stock's 2.2% yield may not turn too many heads -- it's actually about half of Mattel's yield -- but the company's streak of improving payouts every year since the turn of the millennium makes Hasbro the best choice for even the most aggressive income investors.
The seven-year itch
A lot has happened over the past seven years. We've been through the dot-com bubble, a prolonged war, the subprime collapse, and Miley Cyrus' Vanity Fair photo shoot. Not just any company could emerge unscathed, ultimately hitting higher ground on the bottom line as consistently as Hasbro has.
Few will doubt that Hasbro is the kind of stock you want to own during a recession. And it just happens to be the best spot to stash your cash when prosperity returns; while children aren't necessarily denied toys during times of economic strife, they stand to collect more when discretionary income improves.
Last year's amazing spurt – with net revenue and earnings per share soaring 22% and 53% respectively – is uncommonly good, thanks to the Transformers, but there's no denying the company's direction.
In short, Hasbro knows how to bounce. If you agree (or even if you don't), check out our CAPS investing service, see what the community thinks, and give Hasbro your own rating.