Will Aaron's Dividend Hike Help Revive Investors' Trust?

After a hiatus of over a week following the announcement of its third-quarter 2015 results, Aaron's, Inc.AAN declared a dividend hike. The move is being viewed as part of the company's strategy to regain investors' confidence that was shattered after the company's disappointing performance in the last quarter. Since then, shares of this retailer of furniture, consumer electronics, computers, appliances, and household accessories, have nosedived 26%.

This Atlanta, GA-based company raised its quarterly dividend by 8.7% to 2.5 cents a share from the prior payout of 2.3 cents. The increased dividend will be paid on Jan 4, 2016 to stockholders on record as of Dec 1, 2015. This is the tenth successive year in which the company has hiked its dividend. Last year too, in November, Aaron's raised its quarterly dividend by 9.5% to 2.3 cents from 2.1 cents a share.

Other companies that increased their quarterly dividend in the recent past include Nordson Corporation NDSN and Omega Healthcare Investors Inc. OHI . While Nordson hiked its dividend by 9% to 24 cents, Omega Healthcare is committed to return 1.9% more to shareholders through its dividend of 55 cents per share. Another company, Lions Gate Entertainment Corp. LGF raised its dividend by 28.6% to 9 cents per share.

Dividend hikes not only enhance shareholders' return but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it. It remains to be seen to what extent Aaron's will succeed in winning investors' trust through this move.

Aaron's shares were hit hard following its third-quarter results - wherein both the top and bottom lines fell short of the Zacks Consensus Estimate - and the subsequent trimming of its outlook. Adjusted earnings for 2015 are now projected in the band of $2.02-$2.22 per share compared with $2.16-$2.36 guided earlier. (Refer: Aaron's Misses on Q3 Earnings & Sales, Lowers View )

Aaron's currently carries a Zacks Rank #3 (Hold).

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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 Nasdaq, Inc.

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