Rent-A-Center Investors Not Too Happy with Dividend Hike - Analyst Blog

Rent-A-Center, Inc.'s (RCII) recent announcement of a dividend hike did not provide much impetus to this Zacks Rank #3 (Hold) stock that rose marginally by 0.6% to close at $31.30 last Friday.

The Plano, TX-based company, raised its quarterly dividend by 4.3% to 24 cents (or 96 cents annually) from 23 cents a share (or 92 cents annually). The increased dividend will be paid on Jan 22, 2015 to shareholders of record as of Jan 2.

The company's commitment toward increasing shareholders' returns reflects its free cash flow generating capability. The dividend yield, based on the new payout and the last closing market price, is 3.1%.

Rent-A-Center had last hiked its quarterly dividend to 23 cents from 21 cents in Dec 2013, reflecting an increase of approximately 10%.

Other companies that recently increased their quarterly dividends include The Walt Disney Co. (DIS) and The Buckle, Inc. (BKE), which increased their dividends by 34% to $1.15 and 4.5% to 23 cents per share, respectively. Another company, Fortune Brands Home & Security, Inc. (FBHS) recently hiked its quarterly cash dividend by 16.7% to 14 cents.

Dividend hikes not only enhance shareholders' returns but also raise the market value of the stock. Through this strategy, companies bolster investors' confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling it. 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 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.

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