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Leading rent-to-own operator, Aaron's Inc. (AAN - Snapshot Report), announced a 13.3% increase in its quarterly dividend rate. Consequently, the company will now be paying a quarterly dividend of 17 cents per share, up from 15 cents per share.

This brings the annual cash dividend of Aaron’s to 68 cents per share, compared with 60 cents paid earlier. Considering the closing share price of $30.01 on November 7, 2012, the enhanced dividend translates into a dividend yield of 2.3%, considerably higher than the current yield of arch rival, Rent-A-Center Inc. (RCII - Analyst Report), which stands at 1.9%.

The increased dividend will be paid on January 4, 2013 to shareholders of record as of December 3, 2012.

This announcement marks Aaron’s seventh successive yearly dividend hike. Prior to this, the company had raised its quarterly dividend rate by 15.4% to 15 cents per share on November, 2011.

Aaron’s policy of raising dividends annually points towards the company’s strong growth trend as well as financial performance. Last month, Aaron’s reported solid third-quarter 2012 adjusted earnings per share of 46 cents, surging 28% from 36 cents recorded in the year-ago quarter, driven by robust top-line performance.

The company’s cash and cash equivalents at Aaron’s as of September 30, 2012 were $155.6 million and total shareholders’ equity was $1,092.4 million. During the first nine months of 2012, the company generated over $86.0 million in cash flow from operating activities.

Looking ahead, the company remains confident of its future growth prospects, suggesting enhanced value for shareholders via dividend payout as well as share buybacks. As of the end of the third quarter, Aaron’s had nearly 4,044,655 shares remaining under its share repurchase authorization.

Currently, Aaron’s holds a Zacks #1 Rank, implying a short-term Strong Buy rating on the stock. Moreover, the company maintains a long-term Outperform recommendation on the stock.

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