Gadgets and gaming may be eroding tradition­al toy sales, but certain longstanding catego­ries and brands continue to capture children’s imaginations. Although US toy sales as a whole de­clined 2 percent to $21.1 billion in 2011 from the prior year, sales of traditional toys such as dolls and vehicles grew 7 percent and 2 percent, respectively.

These two categories are dominated by Mattel’s (NSDQ: MAT) iconic brands Barbie and Hot Wheels, which have kept the attention of generations of bored kids via constant reinvention. Mattel has a footprint in 150 countries and is the world’s largest toy company by revenue, with $6.3 billion in sales during 2011.

The company’s operations have three major seg­ments: Mattel Girls and Boys (which includes Barbie and Hot Wheels), Fisher-Price and American Girl.

Mattel boasts three of the five top-selling brands of 2011: Barbie, Disney Princess and Cars: The Movie. Additionally, Barbie continued its reign as the pre­mier property in the toy industry for the fifth consecutive year, while Mattel’s Hot Wheels and American Girl brands crossed $500 million in sales.

The company’s new Monster High brand was launched in 2010 along with its own interactive web­site with games and downloads, as well as its own line of books and television specials. The brand has already built strong buzz among its targeted “tween” au­dience, which includes kids from ages nine to 14. Indeed, Monster High is expected to be one of the top-selling brands this Christmas.

Earlier this year, Mattel expanded its reach among a younger demographic by acquiring HIT Entertainment for $680 million in cash, roughly four times HIT’s annual revenue. HIT owns some of the most coveted brands among the preschool set, including Barney, Bob the Builder, and Thom­as & Friends.

Mattel was particularly focused on Thomas & Friends, which accounts for roughly three-quar­ters of HIT’s revenue. The acquisition will also reduce the toy giant’s royalty expenses resulting from previous licensing agreements with HIT.

In 2011, Mattel’s record sales helped net income grow 15 percent to $768.5 million from the prior year. And despite higher production costs and roy­alty expenses, Mattel maintained its goal of keeping operating margins within a range of 15 percent to 20 percent.

The company’s growth was primarily driven by international markets, which accounted for 48 percent of the company’s sales in 2011, up from 46 per­cent in 2010. The Latin American and Asian markets grew 14 percent and 15 percent, respectively. Latin American sales came in just shy of $1 billion. And de­spite Europe’s economic woes, the region still pro­duced sales growth of around 10 percent.

During the first quarter of 2012, Mattel’s interna­tional segment bolstered the company’s top line in the wake of flagging domestic sales. The toy indus­try is highly seasonal, and the first quarter is typically the company’s weakest since it follows the Christmas season. Revenue fell 2 percent to $928.4 million from a year ago, while profits dropped 53 percent, largely due to integration costs associated with the aforementioned acquisition.

But even after the HIT acquisition, Mattel still has $784 million in cash on its balance sheet and just $1.2 billion in long-term debt. The company also pays a well-covered dividend, with a low 41.3 percent payout ratio. Management boosted the firm’s payout anoth­er 11 percent in 2012, which means shares now yield roughly 3.8 percent.

After spending all that money on toys for wee ones, a timely investment in Mattel means you can finally profit from your own largesse.