Character Group is a toy, games, and gift ware designer and developer. Character is responsible for much loved children’s characters such as Peppa Pig, Teletubbies, and Postman Pat to name a few.
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As I write, Character shares are trading for 620p, compared to this time last year when shares were trading for 425p. This equates to a 45% return over a 12-month period. More recently, the shares have been on an upward trajectory since October after a small dip in share price. The shares are up over 30% since October at current levels.
A FTSE growth option
Character operates in an inelastic market. General economic conditions tend not to affect the toy and games market. With this quality, and the fact it pays a dividend, it could be seen as an attractive option for my portfolio. I think the shares could rise further as 2022 develops.
Next, Character’s performance and growth has been consistent recently and historically. I do understand past performance is not a guarantee of any future performance but I like to use it as a gauge when determining investment viability. Character released its most recent full-year results for the year ending 31 August 2021 in December. Character confirmed revenue, profit, EBITDA, net cash, and dividends increased compared to 2020 levels. Character’s dividend yield currently stands at just under 3%, which is enticing for a FTSE AIM incumbent. Historic performance shows me prior to 2020, Character was able to grow revenue year on year before the pandemic affected performance slightly. 2021 levels have surpassed pre-pandemic performance, which is encouraging.
Finally, Character’s products are being recognised as some of the best in the market. This was highlighted when two of the company’s toys were recognised in the best toys wish list of the year in September. This is a list compiled by the Toy Retailers Association (TRA) each year.
Risks and verdict
Character is not averse from risks that could derail progress. Firstly, competition in the toy and games market is more intense than ever. The market is growing and children are becoming more savvy therefore firms are looking for the next big toy or game to increase performance and boost financials. Secondly, despite operating in an inelastic market, factors such as supply chain issues and rising costs could still affect Character’s bottom line. Any decline in performance could lead to dividend cancellation, as dividends aren’t guaranteed.
Overall I am bullish towards Character Group shares right now. I believe they could see excellent growth in the year ahead and beyond and I would add shares to my holdings at current levels. Character is an FTSE AIM stock that pays a consistent dividend with an enticing yield and has well respected and recognised products. I think the shares look cheap right now too with a price-to-earnings ratio of just 11.