|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
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.