Little Response to Rent-A-Center Dividend Hike - Analyst Blog

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Rent-A-Center, Inc. 's ( RCII ) recent announcement of dividend hike did not provide any impetus to this Zacks Rank #5 (Strong Sell) stock; instead shares fell marginally by 0.8% to close at $33.35 on Friday as investors remained disappointed with the company's dismal third-quarter 2013 performance. The dismal results had also compelled management to lower its full-year earnings projection.

The Plano, Texas-based company, raised its quarterly dividend by 10% to 23 cents (or 92 cents annually) from 21 cents a share (or 84 cents annually). The increased dividend will be paid on Jan 23, 2014, to shareholders of record as of Jan 3, 2014. This is the fifteenth successive dividend.

The company's commitment toward increasing shareholders' return reflects its free cash flow generating capability. The dividend yield based on the new payout and the last closing market price is 2.8%.

Rent-A-Center last hiked its quarterly dividend to 21 cents from 16 cents in Dec 2012, reflecting an increase of approximately 31%.

Other companies that recently increased quarterly dividend include Snap-on Inc. ( SNA ) and Sysco Corp. ( SYY ). The companies raised their dividends by 15.8% to 44 cents and 3.6% to 29 cents, respectively. Another company, Enbridge Inc. ( ENB ) recently hiked its dividend by 11% to 35 cents.

Dividend hikes not only enhance shareholder's return but also raise the market value of the stock. Through this strategy, the companies bolster investors' confidence on the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, the company remains confident of its growth potential, suggesting enhanced value for shareholders.

Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase schemes that allow customers to own the merchandise upon the completion of the rental period. Due to continued tightening of the credit market, customers view rent-to-own as a more flexible and viable option compared to credit. However, the sluggish recovery and a fragile job market may make customers reluctant to enter new rental-purchase deals.



ENBRIDGE INC (ENB): Free Stock Analysis Report

RENT-A-CENTER (RCII): Free Stock Analysis Report

SNAP-ON INC (SNA): Free Stock Analysis Report

SYSCO CORP (SYY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ENB , RCII , SNA , SYY

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