With interest rates showing no sign of improving anytime soon, investors are more apt to continue turning to dividend-paying stocks for decent income, despite the added risk relative to bonds. But these stocks have become so popular, that reasonably-priced assets are getting tougher to find.#-ad_banner-#

I’ve been keeping an eye out, though, and discovered that one of the most attractive income-producing stocks on the market is still a great choice. During the five years from Jan. 1, 2007 through Dec. 31, 2011, the stock returned $599 million to shareholders as dividends. What’s more, it’s on pace to pay out another $187 million in 2012.

It’s not an oil and gas conglomerate, real estate investment trust (REIT) or other type of stock usually associated with dividends. No, I’m referring to a world leader in toys, games, TV and other forms of entertainment for kids — Hasbro Inc. (Nasdaq: HAS).

Hasbro’s annual payout of $1.44 a share is good for a yield of nearly 4% based on its current stock price of roughly $38.50. The dividend expanded very quickly to reach that point, rising about 28% annually since 2002, when dividends amounted to 12 cents a share. Mind you, times are tougher now, so I wouldn’t expect results like that in the future. But I see no reason why Hasbro shouldn’t keep posting solid dividend growth and offer a very attractive yield going forward.

For one thing, Hasbro is the second-largest company of its kind by revenue, with total annual sales in excess of $4 billion (compared with $6 billion for industry leader Mattel Inc. (Nasdaq: MAT)). Hasbro boasts an array of formidable brands, such as Transformers, Playskool, Nerf, G.I. Joe, Tonka, Parker Brothers and Milton Bradley. The company is also licensed to market products under other extremely popular brand names, including Beyblade, Marvel, Sesame Street and Star Wars.

Product lines run the gamut from action figures and playsets, to plush toys and board games. Along with traditional advertising, Hasbro promotes its products globally through TV shows and movies produced by its company-owned Hasbro Studios.

I foresee annual sales rising at a 6% rate overall, potentially hitting $4.5 billion this year and $5.6 billion by 2017. The entertainment and licensing segment, which handles licensing agreements and TV/movie promotions, should be a key driver of future growth. The segment may look small on paper, with projected revenue of $300 million in 2012. But it’s growing fast and this year’s revenue could be about an 85% gain from the $162 million generated in 2011. Plus, the segment provides crucial product exposure via the Hasbro-branded movies and TV shows distributed across 170 countries.

Because of its global influence, entertainment and licensing is a strong complement to the international segment, which could keep building a progressively larger share of revenue because of expansion into less mature, higher-growth emerging markets like China, Brazil, Russia, Korea and Columbia. Revenue in this segment has climbed about 8% annually, from $1.5 billion in 2009 to $1.9 billion in 2011. By contrast, revenue from more mature U.S. and Canadian markets has been off a bit, dipping 1.4% a year from $2.5 billion to $2.25 billion during the same period. The international segment should deliver 46% of total revenue in 2012 (about $2 billion), compared with 36% ($1.5 billion) in 2009. 

Risks to Consider: Hasbro’s business is highly seasonal, with two-thirds of revenue coming in the second half of the year when most consumers do their holiday shopping for the types of products Hasbro sells. The stock price could take a nasty hit if second-half results disappoint — a very real risk with the economy the way it is.

Action to Take–> Because of Hasbro’s strong international growth prospects, I agree with analyst projections for earnings to climb at a solid 6.5% pace and dividends to expand 9% annually through 2017. Thus, at that point, the dividend could reach $2.22 a share and the total payout could hit nearly $288 million based on the number of shares currently outstanding (129.7 million).

If earnings grow as projected, then I estimate the stock could rise 30% to about $50 a share in 2017. At that point, the yield would be even better than it is now — roughly 4.5%. So even though appreciation potential looks relatively modest, the stock should remain an excellent choice for income investors for quite some time.