Rent-A-Center, Inc. (RCII), a $2.1 billion market cap company, together with its subsidiaries primarily engages in leasing household durable goods to customers on a rent-to-own basis. The company's 3,000 stores offer durable products, such as consumer electronics, appliances, computers, and furniture and accessories under flexible rental purchase agreements that allow the customer to obtain ownership of the merchandise at the conclusion of an agreed upon rental period.
RCII, the nation’s largest rent-to-own operator, today announced that its board of directors has approved a 167% increase in its quarterly cash dividend from $0.06 per share to $0.16 per share, beginning with the dividend for the third quarter of 2011. Mark E. Speese, chairman and CEO, said:
Our strong financial position enables us to enhance our returns to stockholders through a dividend increase. In addition to reflecting the Company’s confidence in its strong cash flows, this dividend increase represents our belief that continued investments in our strategic initiatives will generate growth and provide long-term value for our stockholders.
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Rent-A-Center, Inc. was founded in 1986 and is headquartered in Plano, Texas. RCII reported $0.70 per share in earnings for the quarter ending March 31. The next reporting quarter estimated mean earnings are $0.72 per share. Analyst estimates range between $0.70 and $0.74 per share. The current trailing 12 months (ttm) P/E ratio is 12.726 and the forward P/E ratio is 9.63. RCII has a price to book ratio (ttm) of 1.57 and a price to sales ratio of 0.78. The annual growth rate of the revenue is flat at a rate of -0.0074%. The current dividend as a percentage of the trailing 12 months income is 0.0462% (see graph below).
RCII is doing a good job managing accounts receivable as well. The last fiscal year had accounts receivable to sales percentage of 0.0197% compared to the same period a year earlier of 0.0231%. For the trailing 12 months, investors received $0.12 for a yield of 0.0037%. Based on the current price at the time of this writing and the current increased payout of $0.16, RCII now has a yield of 2%.
Like all my swing to longer term trades, the last thing I think is important to look at is what options have the highest volume and offer the best opportunity. If everything else matches up as needed, I will be looking to short put options expiring in June at a strike price of $30, for a price of $0.65 or better.
Beyond the aforementioned numbers, which look good, investors should consider other key figures. RCII has flat revenue year-over-year (yoy) of $2.73 billion for 2010 vs. $2.75 billion for 2009. Additionally, a couple of bottom line number trends give the impression of management executing the business plan very well.
RCII bottom line has rising earnings year-over-year (yoy) of $171.64 million for 2010 vs. $167.86 million for 2009, and rising EBIT year-over-year (yoy) of $303.77 million for 2010 vs. $296.32 million for 2009.
I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Based on my criteria, I have come to the following conclusion: I will be looking for an ideal entry price to either write put options or buy the stock. Of course that in itself does not mean you should, but you may want to use this article as a starting point of your own research with your financial planner. I use Seeking Alpha, Edgar Online, Goggle Finance, MSN Money, cnbc.com, Zacks and Yahoo Finance for most of my data and may or may not double-check it with the SEC filings.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RCII over the next 72 hours.