Is H&R Block Inc (NYSE:HRB) A Smart Choice For Dividend Investors?

There is a lot to be liked about H&R Block Inc (NYSE:HRB) as an income stock, over the past 10 years it has returned an average of 3.0% per year. The company is currently worth US$5.44b, and now yields roughly 3.8%. Does H&R Block tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for H&R Block

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it the top 25% annual dividend yield payer?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

NYSE:HRB Historical Dividend Yield August 28th 18

How well does H&R Block fit our criteria?

The company currently pays out 32.1% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 49.6%, leading to a dividend yield of 3.8%. However, EPS is forecasted to fall to $1.88 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of HRB it has increased its DPS from $0.60 to $1 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes HRB a true dividend rockstar.

Relative to peers, H&R Block generates a yield of 3.8%, which is high for Consumer Services stocks but still below the market’s top dividend payers.

Next Steps:

With this in mind, I definitely rank H&R Block as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for HRB’s future growth? Take a look at our free research report of analyst consensus for HRB’s outlook.

2. Valuation: What is HRB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HRB is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.