This Under-the-Radar Stock Yielding 8.2% Could Be a Big Winner in 2026

If you invest in dividend stocks, you know that there's no free lunch. The higher the yield, the larger the risk. The bigger the distributions, the more likely they are to be unsustainable in the near future.

What if I told you there's a consumer-facing business you probably know, trading publicly as a company that you probably don't know? What if I told you that it currently offers an 8.2% dividend yield, and for the time being should be able to cover those beefy distributions?

You would be curious, I imagine. OK, let's talk about Upbound (NASDAQ: UPBD).

Image source: Getty Images.

Getting down with Upbound

Unless you already know what Upbound does -- and, if so, consider yourself in rare company -- your mind can wander among the possibilities. Is this the name of a cloud-based tech platform that monitors a website's uptime? Is this the operator of a trampoline park? Wait, this has to be the name of a new pharmaceutical company aiming to enhance your bedroom life.

No, no, and heck, no.

Upbound is the company that, until three years ago, was known as Rent-A-Center. Yes, that Rent-A-Center. It's been in business since 1973, and still a leader in this niche. It offers lease-to-own furniture, appliances, and consumer electronics through more than 1,700 locations in North America. If you've never had to rent your sofa, TV, computer, or refrigerator, consider yourself blessed with reasonably predictable income and at least a decent credit score.

For a good-sized chunk of the rental community, living paycheck to paycheck sometimes means not having the means to buy the home furnishings or tech gadgetry you need to rest and stay connected. Upbound's Rent-A-Center solves that problem.

The company rebranded itself as Upbound three years ago because it's doing a bit more than just keeping its sleepy but historically growing chain going. Five years ago, it acquired a tech company called Acima. The platform it acquired helps other businesses manage their own lease-to-own options. It serves more than 11,000 different retailers with over 14,000 locations and, in some cases, e-commerce operations. With so many traditional retailers struggling, Acima offers a new incremental revenue stream that also widens a concept's target audience.

An intriguing collection of businesses

It's neat that an icon of lease-to-own goods became an enterprise software specialist by sharing the knowledge it has accumulated over the past 53 years. And Upbound has another new tech trick up its sleeve.

Early last year, Upbound closed on its acquisition of smartphone app developer Brigit. This is a well-rated personal finance app for folks looking to beef up their credit. It helps its more than 12 million users build up their credit, plan for upcoming expenses, and also provides small cash advances.

Upbound acquired Acima and, more recently, Brigit because they are extensions of its existing market. Brigit is an appealing download for its Acima and Rent-A-Center customers. You might argue that the altruistic goal of improving the creditworthiness of its target audience weans them off its ecosystem, but it also enhances the ability to if its existing customers to stay current with their lease-to-own obligations.

It all adds up

The numbers don't lie: Revenue has been rising in the high single digits in each of the past two years. Analysts see that continuing this year with a 7% top-line lift. Its profitability remains strong, more than enough to cover its dividend -- which it has increased five times since resuming distributions seven years ago.

The forward dividend payout ratio is lower than you might think. Analysts see Upboard delivering adjusted net income of $4.70 a share this year, pricing the shares at a forward P/E ratio barely above 4.

The risks are there. Like many of its customers, Upbound has its own outsize debt to manage. This is also a business that is highly sensitive to economic slowdowns. If unemployment spikes and the country dives into a recession or worse, there will be customer defaults.

Thankfully, this bleak scenario seems to have already been priced into the stock. Upbound shares have fallen 35% over the past year and 60% over the past five years. Suddenly, that healthy dividend seems gutted by capital depreciation. But I don't see it that way. This is a turnaround opportunity knocking, armed with a clever portfolio of businesses. The stock hasn't lived up to its company name, but the shares could finally earn the Upbound moniker in 2026 if its revenue, profitability, and dividend keep rising.

Rick Munarriz has positions in Upbound Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.