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Aaron's to Buy Back $125M Shares

Zacks Equity Research

The rent-to-own operator, Aaron's Inc. (AAN), declared an accelerated share repurchase program to buyback its common shares worth about $125 million.

For this, the company collaborated ties with Wells Fargo Bank, National Association, a subsidiary of Wells Fargo & Company (WFC). Per the deal, Aaron’s was scheduled to buyback about 3.5 million of Aaron’s common stock on Dec 4, 2013, receiving a consideration of about $125 million. This represented nearly 80% of the number of shares planned to be repurchased under the program.

The company expects to conclude this accelerated share repurchase program by May 2014. However, the program has the option to be either completed earlier or even extended.

Aaron’s total shares outstanding as of Oct 25, 2013 were nearly 76.3 million. The company plans to use its available cash to buyback shares under the program. As of Sep 30, 2013, the company had cash and investments of $309.2 million, while it generated nearly $244.0 million of operating cash flow during the first nine months of 2013.

With the intention of reviving its halted share repurchase activity since the beginning of 2013, Aaron’s authorized an additional share repurchase program of 11 million on Oct 4. This brought the company’s total authorization as of that date to 15 million.
Additionally, this Zacks Rank #3 (Hold) company has a consistent track record of rewarding shareholders through regular dividend payouts. The company is currently scheduled to pay a raised quarterly cash dividend of 21 cents on Jan 3, 2014 to shareholders with record as of Dec 2, 2013. Representing an increase of 23.5% from the prior dividend rate of 17 cents, this will mark the company’s 8th consecutive annual dividend increase.

Aaron’s has paid regular quarterly cash dividends since 2000. The company’s strategy of paying regular dividends and increasing the same reflects its commitment to enhance long-term value for shareholders. It also depicts the company’s ability to boost earnings and cash flows in the long run.

We believe that dividend payments and share repurchases not only enhance shareholders’ return, but raise the market value of the stock as well. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the script instead of selling it. Looking ahead, Aaron’s remains confident of its growth potential, thereby raising hopes for further enhancement of shareholder value through dividend payouts and share buybacks.

Other companies that recently announced new share repurchase authorizations include Mondelez International Inc. (MDLZ) and Union Pacific Corp. (UNP).

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Read the Full Research Report on UNP
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