With a dividend that's yielding over 4.4%, Mattel (NASDAQ:MAT) could be the kind of stock purchase that investors set and forget for years. It's a strong brand with a history of growth and an increasing dividend payment. However, there some key points that investors should keep in mind when looking at the business -- it's not all Barbie dolls and Angry Birds.

Cash is king, but the throne needs work
At the end of last year, Mattel had $1.04 billion in cash and equivalents on hand. That was a $330 million drop from the end of 2012. Mattel's cash position has taken a dive over the last two years, which gives the company less to work with if it needs to dip into its reserves to pay out a dividend at some point.

While that's not normally an issue, Mattel is spending a considerable amount of what it generates on filling up investors' pockets. In 2013, the company spent $494 million paying out dividends, which was equivalent to 55% of its total net income.

The situation was even tighter when you look at the percentage of Mattel's free cash flow that was paid out. The business only generated $446 million in free cash flow last year. That means that, after investing in ongoing operations, Mattel is already dipping into reserves to meet its dividend commitments. It doesn't help matters that Mattel's management has decided to keep increasing its dividend, up 6% from the previous year.

On top of its dividend payments, Mattel also dropped $493 million last year on share repurchases. It bought back 11 million shares over the year, at an average of around $44.80 per share. The stock currently trades at $34.10.

Mattel has a sales problem
The problems that Mattel has had generating cash can be traced back to a fundamental sales problem. While the company controls classic brands like Barbie and Fisher Price, it has had a difficult time recently keeping sales growth level. Boys' sales seem to be especially susceptible to fluctuations in the entertainment market, driven higher by big movie releases and hit TV shows.

That means that Mattel is to a certain extent dependent on the success of others. Last year, the company was comparing its performance to the success it saw on the back of Batman and Angry Birds in 2012, for instance. It couldn't keep up that pace, and sales took a hit.

That doesn't mean that this year won't be good, though. Mattel is constantly hoping that the next big thing will be really, really big so that it can cash in. With Star Wars Episode VII slated for next year, 2015 could be huge, too.

The problem for Mattel is that it has a hard time building that kind of fanaticism with its primary product lines. Barbie and Fisher Price have both bounced around, causing the company difficulty in planning for future sales and expenditures. That's part of what investors are seeing in the balance sheet, as the company buys into new designs and toys, requiring new production equipment which is, effectively, a bet on how well a line will perform in the market. Right now, Mattel seems to be doing a poor job predicting trends.

The bottom line for investors
This breakdown is full of household names that aren't going away. Mattel has its teeth sunk into the American consciousness. But in order to keep pumping out dividends, it needs to better manage its resources. That starts at the top, with management getting a better handle on what it is that kids are looking for and what brands are really going to take off in a given year.

That can help the company cut down on costs, cut back on promotions, and decrease the cash that it's spending out of pocket. The company will then be able to look at better applications of its cash -- perhaps by cutting back on share repurchases when the stock is having one of its highest years ever, for instance.

If Mattel can get those pieces in place, then it could have a long run as a solid dividend stock for investors. Right now, there's a dividend to be had -- but there are real questions about the longevity of that dividend if things keep going the way they have been.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.