), one of the largest rent-to-own operators, recently announced a
dividend hike, revealing its plan to utilize its free cash to
boost stakeholders' return.
Plano, Texas-based company, Rent-A-Center, raised its
quarterly dividend by 31% to 21 cents (or 84 cents annually) from
16 cents a share (or 64 cents annually). The company announced
that the increased dividend will be paid on January 24, 2013 to
stakeholders of record as on January 3, 2013. This is the 11th
successive cash dividend.
However, the news did not provide much impetus to the stock,
as the share price of Rent-A-Center rose by 1.8% or 62 cents to
close at $35.78 on Tuesday. The dividend yield based on the new
payout and the last closing market price is 2.3%.
In May 2011, Rent-A-Center, last hiked its dividend to 64
cents from 24 cents a share, reflecting an increase of 167%.
Rent-A-Center's commitment towards increasing shareholders'
return reflects its free cash flow generating capability, sound
liquidity position and defined future prospects. During the
first-nine months of 2012, the company generated cash flow from
operations of about $258.7 million.
Dividend increases 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 about
its growth prospects, suggesting enhanced value for shareholders
via dividend payout as well as share buybacks.
During the first-nine months of 2012, the company bought back
866,985 shares for approximately $30.1 million. Since the
inception of the share buyback program, the company has
repurchased 30,189,738 shares and employed approximately $745.6
million out of the $800 million authorized. The company's board
of directors enhanced the share repurchase authorization by an
additional $200 million to $1 billion.
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
Currently, we maintain our long-term Neutral recommendation on
the stock. Moreover, Rent-A-Center, which competes with
), retains a Zacks #3 Rank that translates into a short-term Hold
AARONS INC (AAN): Free Stock Analysis Report
RENT-A-CENTER (RCII): Free Stock Analysis
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