10-08-02
RTO Online

Factoids

Rent A Center has 2,367 locations

ColorTyme, a RAC subsidiary, operates 329 locations

Rent-A-Center Board of Directors has doubled the amount authorized to buy back RCII shares from $25 million to $50 million.

Since a company cant own itself, the actual effect of a stock 'buyback', or 're-purchase' is the reduction of shares available to trade. This reduces the supply and raises the value of the remaining shares. In effect, giving remaining shareholders a dividend. Another advantage buybacks have over dividends is that they are taxed at a lower capital-gain tax rate whereas a dividend is taxed at ordinary income tax rates.

An announcement of a stock buyback doesn't require a company to follow through. Some companies use a re-purchase announcement as nothing more than a marketing strategy to get a short term bump in stock price. (At press time, Rent A Center stock is trading up over 3% on heavy volume) Rent A Center, however, has already re-purchased over $22 million of the previously authorized $25 million, and seems intent on buying more.

Perhaps the biggest benefit of a buyback to investors in a shaky market is confidence. When a company sees it's own stock as it's best investment, it is usually rewarded with a higher stock price.

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