Dividend-growth portfolio holding Hasbro (HAS) reported mixed fourth-quarter results Monday and increased its dividend a whopping 20%, even more than we had anticipated. Though we had expected a nice dividend increase for 2012, we’ll be updating our dividend report on the company shortly.
The firm reported a 4% increase in revenue in the fourth quarter from the same period a year ago thanks to strong international growth (up 8%), offset by lower-than-expected growth in its US and Canada segment (down 2%). The top-line was weighed down by challenges in its Games & Puzzles and Girls categories, which fell 11% and 16%, respectively. However, we think management has taken the appropriate steps post-Thanksgiving to re-accelerate growth in these segments via new leadership and a focus on innovation. In contrast, revenue in its Boys and Preschool segments advanced 29% and 15% in the fourth quarter, respectively.
In the fourth-quarter, Hasbro’s net earnings per share jumped to $1.06 from $0.99 from last year’s period thanks primarily to aggressive share buybacks. Net earnings fell modestly to $139.1 million from $140 million in the year-ago quarter, but this was due primarily to a higher tax rate (26.4% versus 19.2%). The firm’s operating margin fell in both major segments (US and Canada; International), but the operating margin in its Entertainment and Licensing segment jumped roughly 5.5 percentage points, so we were very pleased with the performance there. Overall, the company’s operating margin increased to 16.3% from 15.7% in last year’s quarter.
Importantly for income investors, Hasbro raised its dividend 20%, to an annual payout of $1.44 per share, reflecting a 4%+ yield at current prices. For 2012, we expect continued growth in revenue and earnings, improved performance from its lagging Games & Puzzles and Girls categories, and continued strength in its Entertainment and Licensing segment. Specifically, the company should reap the rewards from five planned movie releases this year, including “The Amazing Spider Man” and a film centered on G.I Joe. We continue to believe Hasbro is a core holding in our Dividend Growth portfolio.