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Rent-A-Center Stock Higher After Buyback, Dividend Increases

Rent-A-Center authorized $500 million of share buybacks and a 10% dividend increase to 34 cents a share.
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Rent-A-Center  (RCII) - Get Rent-A-Center Inc Report shares rose Friday after the household-goods rental company authorized $500 million of share buybacks and a 10% dividend increase.

The buyback moves comes after completion of a previous $250 million authorization from August. 

The dividend, payable to shareholders of record Dec. 16, will be 34 cents a share, up from 31 cents the prior quarter.

Rent-A-Center recently traded at $45.84, up 2%. It has gained 19% year to date, but has slumped 29% over the past three months.

Many retail investors’ favorite furniture company is Boston-based Wayfair  (W) - Get Wayfair, Inc. Class A Report, which recently traded at $234, down 1%. It has climbed 4% year to date, but has slid 15% over the past three months.

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Morningstar analyst Jaime Katz puts fair value for Wayfair at $120 and assigns it no moat.

“Given Wayfair’s lifecycle position, with significant growth potential but also corresponding expenses to achieve market-share gains, we expect return on invested capital to be volatile,” she wrote in a commentary last month.

“We think Wayfair can hit some of its long-term goals, but the duration of execution to achievement is trickier.

“While it plans to exceed its prior 25% to 27% gross margin target longer term (we forecast 28%), we forecast operating expenses won’t fall in management's goal of 15% to 19% of sales until 2030 (when we forecast 18.5%).

“We plan to watch postpandemic customer-acquisition cost trends to determine whether Wayfair could develop a network effect.”

To be sure, “Wayfair continues to take share in the fragmented home-goods market, which it believes represents a $840 billion global opportunity between North America and Europe,” Lash said.