Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Disney's stock began struggling about the same time as Mattel's began rebounding in mid-to-late Furthermore, the two have business ties that ebb and flow over time, as Mattel is awarded or loses licenses to produce toys based on Disney's movies and other intellectual property.
Disney's stock began struggling nearly a year and a half ago, which is about the same time Mattel's stock began rebounding. The Mouse's stock struggle has been due to the market's concerns that cable cord-cutting is adversely affecting the profitability of the company's cable networks business, particularly cash-cow ESPN. Mattel's stock rebound has largely been driven by rebounding sales of its iconic Barbie doll.
While we're only just over four months in, that call is on track, as Disney's stock has made a big comeback since November, while Mattel's started dropping about the same time.
There's been a change of tide in recent months, with Disney's stock jumping and Mattel's declining. We now have another quarter of earnings reports behind us, and the stocks have moved in opposite directions -- which in this case means that the valuation of Disney's stock has increased and Mattel's has declined.
So we're going to take a fresh look at the same question: Which stock -- Disney or Mattel -- looks most attractive as a long-term investment? This factor is decidedly in Disney's favor, even though both companies' EPS increased about the same percentage. Over the short term, companies can grow earnings without revenue growing, but this dynamic can't continue over the long term.
Disney has had challenges related to cable cord-cutting in media networks, its largest business. Disney's management is aggressively positioning the company so that ESPN and its other content will continue to thrive no matter how the consumer TV-viewing market evolves. Nonetheless, this situation illustrates a point in Disney's favor: Mattel has less control over its destiny than does Disney, in my opinion. Another factor in Disney's favor is long-term total return stock price appreciation plus dividends.
In general, this factor should work in Mattel's favor, as it's easier for smaller companies to grow earnings -- which generally fuel stock prices -- on a percentage basis than it is for larger companies, because they're starting with a smaller base number. Rebounding Barbie sales boost the argument for Mattel's stock.
That makes two consecutive quarters of year-over-year sales increases -- and strong double-digit ones at that.
Mattel: Buy On The Drop? - Mattel, Inc. (NASDAQ:MAT) | Seeking Alpha
Mattel's Q4 Barbie sales will be very telling, as the holiday quarter is often make-or-break for retailers, especially toy retailers. Mattel's Q4 earnings should be released in early or mid-February. For investors concerned with current income, Mattel's stock is the better choice.
Its dividend is yielding a juicy 5. However, Disney's dividend has much more room for growth, so investors not overly concerned with current income should take this factor into account. This is not an infinitely sustainable situation. Disney's cash dividend payout ratio is a conservative Choosing between these two stocks comes down largely to believing that one of these scenarios is more probable:. I continue to believe that Disney's stock makes the better bet for the long term.
Buy or Sell MAT (Mattel) stocks?
It has successfully navigated numerous changes in the consumer media market over its long history, so there is every reason to believe it will do so again, as more consumers cut the cable cord and consume their TV and other media via streaming services. Beth McKenna has no position in any stocks mentioned.
The Motley Fool owns shares of and recommends Hasbro and Walt Disney. The Motley Fool has a disclosure policy.
Skip to main content The Motley Fool Fool. Premium Advice Help Fool Answers Contact Us Login.
Latest Stock Picks Stocks Premium Services. Stock Advisor Flagship service. Rule Breakers High-growth stocks. Income Investor Dividend stocks. Hidden Gems Small-cap stocks. Inside Value Undervalued stocks.
Learn How to Invest. Credit Cards Best Credit Cards of Best Credit Card Sign-Up Bonuses Best Balance-Transfer Credit Cards Best Travel Credit Cards Best Cash-Back Credit Cards Best No-Annual-Fee Credit Cards Best Small Business Credit Cards.
Mortgages Compare Mortgage Rates Get Pre-Approved How Much House Can I Afford? Taxes How to Reduce Your Taxes Deductions Even Pros Overlook Audit-Proof Your Tax Return What Info Should I Keep?
Helping the World Invest — Better. How to Invest Learn How to Invest. Personal Finance Credit Cards Best Credit Cards of Best Credit Card Sign-Up Bonuses Best Balance-Transfer Credit Cards Best Travel Credit Cards Best Cash-Back Credit Cards Best No-Annual-Fee Credit Cards Best Small Business Credit Cards.
Jan 17, at Prev 1 2 3 4 Next. Motley Fool push notifications are finally here Allow push notifications to help you stay on top of Breaking investing news Earnings coverage Market movers Special offers and more Subscribe to notifications You can unsubscribe at any time.