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Rent-A-Center to Initiate Quarterly Dividend, Stock Rises

Zacks Equity Research

Rent-A-Center, Inc. RCII is focusing on boosting investor value through several growth initiatives and shareholder-friendly moves. To this end, the company announced initiation of quarterly cash dividend of 25 cents after completion of the refinancing of revolving credit facility and outstanding senior notes. The first quarterly cash dividend is anticipated to be announced in September and will be due in October.

With regard to refinancing, the company is likely to sign contracts of new credit facilities, replacing the existing revolving credit facility. These refinancing proceeds, along with cash on hand, will be used to redeem the senior unsecured notes maturing in 2020 and 2021.

Markedly, shares of this Plano, TX-based company increased approximately 3% after this announcement on Jun 27. In the past three months, shares of this Zacks Rank #1 (Strong Buy) company have rallied roughly 23% outperforming the industry’s growth of 2.8%.

We appreciate the company’s efforts to consistently enhance long-term shareholder value. Dividends not only improve shareholder returns 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.

These apart, the company is focusing on cost containment, improving traffic trends, targeted value proposition and augmenting cash flow. It is also rationalizing store base and lowering debt load. The company lowered its net debt by more than $220 million during 2018 and $82 million in the first quarter of 2019.

Also, the company’s cost saving initiatives reduced cost by $70 million in 2018. For 2019, it expects the cost-saving initiatives to help lower costs in excess of $140 million.

Further, Rent-A-Center is investing in enhancing omni-channel platform so that customers can experience a seamless approach across channels, markets, retailers, products and brands. The company is increasing e-commerce offerings and mobile applications, and leveraging cloud-based point-of-sale platform to manage orders more efficiently, lower losses and cut operating costs.

We expect all aforementioned factors to continue bolstering the company’s performance, and help it remain in investors’ good books.

Other Key Picks

The Children's Place, Inc. PLCE has a long-term earnings growth rate of 8% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. BBY has a long-term earnings growth rate of 8.8% and a Zacks Rank #2 (Buy).

Aaron's, Inc. AAN has a long-term earnings growth rate of 15% and a Zacks Rank #2.

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