Down More Than 50%, Are These 2 Overlooked Dividend Stocks Buys?
Shares of popular rent-to-own or lease-to-own (LTO) companies have slumped considerably year to date as investors worry that consumers, especially those at the lower end of the economic ladder, are under pressure from inflation and the end of government stimulus payments. As such, the stocks of Rent-A-Center (NASDAQ: RCII) and The Aaron's Company (NYSE: AAN) are down 68% and 53%, respectively. But these businesses should be more resilient than skeptics expect, trade at attractive valuations, and offer strong dividends. Let's take a closer look at Rent-A-Center and Aaron's.
LTO businesses allow a customer to rent or lease items like home appliances, furniture, or electronics by making multiple payments over time before they eventually own the product. The companies make money because the total amount paid over the course of the lease is higher than what consumers would have paid if they bought the items outright. These goods are typically leased on a 12- to 24-month basis. Rent-A-Center has over 2,400 locations in North America, including 466 franchised stores and 123 locations in Mexico. Aaron's has over 1,300 locations in North America, with 1,076 of these being company owned and 236 being franchised.
Some critics frown upon the LTO business model because they feel it takes advantage of consumers on the lower end of the economic scale. Customers end up paying more over time for items they lease to own than they would have had they simply purchased the product outright. The other side of the coin is that businesses like Rent-A-Center and Aaron's are filling a void because at this point in time, these consumers don't have many other options for buying big-ticket items like appliances or furniture because they don't have the savings or credit to obtain them in any other way.
Source Fool.com
