Updated 3/10/25
H&R Block (NYSE: HRB) has been a go-to name in tax preparation for decades. Whether through its in-person tax services or digital platforms, the company has helped millions of Americans navigate tax season with ease. While taxes are its primary business, H&R Block has been branching out into financial services, including small business banking and advisory offerings. This diversification is a step in the right direction, though the company’s core revenue still heavily depends on tax season.
For dividend investors, HRB presents an interesting opportunity. It has a solid track record of paying dividends, a reasonable payout ratio, and steady free cash flow to back up distributions. That said, there are some financial complexities and market risks to consider. With a current forward dividend yield of 2.7% and a history of dividend growth, let’s take a closer look at what makes this stock tick for income-focused investors.
Key Dividend Metrics
💰 Dividend Yield: 2.7% (Forward)
📈 5-Year Avg. Dividend Yield: 3.86%
📊 Payout Ratio: 39.04%
🚀 Dividend Growth: 10% annualized over the past five years
📅 Next Dividend Date: April 3, 2025 (Ex-Dividend: March 4, 2025)
🔄 Dividend Safety: Moderate, backed by strong cash flow
Dividend Overview
H&R Block has proven itself as a reliable dividend payer over the years. Right now, its forward dividend yield sits at 2.7%, which is respectable, though slightly below its five-year average of 3.86%. This suggests that the stock price has been rising faster than the dividend, which isn’t necessarily a bad thing.
One of the best things about HRB’s dividend is its sustainability. With a payout ratio of 39%, the company isn’t overextending itself, leaving room for future growth. Even if earnings fluctuate, the dividend looks well-supported for the foreseeable future. Investors who appreciate a combination of yield and dividend growth should find HRB appealing, especially given its track record of consistent increases.
Dividend Growth and Safety
A key reason HRB’s dividend remains secure is its ability to generate strong cash flow. Over the past year, the company produced $767 million in operating cash flow and $597 million in free cash flow. That’s more than enough to cover its dividend obligations while still allowing for reinvestment in the business.
That said, the company does carry a fair amount of debt, with total obligations sitting at $2.68 billion. This isn’t necessarily a dealbreaker, but it does mean HRB has financial obligations that could limit future flexibility. Another factor worth noting is its negative book value per share, which suggests that share buybacks have been prioritized over maintaining a strong balance sheet. While buybacks can be a great way to return value to shareholders, they can also leave the company more vulnerable if economic conditions turn south.
Overall, HRB’s dividend is in a good place for now, but it’s worth keeping an eye on its debt levels and how it manages capital going forward.
Chart Analysis
Price Trend and Moving Averages
The chart shows H&R Block (HRB) has been in a downtrend since peaking above $65. The stock had a strong run-up last year, but momentum faded, leading to a steady decline. The 50-day moving average (blue line) has been trending downward since late last year, reflecting the ongoing weakness in price action. The 200-day moving average (purple line), which typically serves as a longer-term trend indicator, is flattening out after an extended uptrend.
A key observation is the recent price action relative to these moving averages. The stock had been trading below both the 50-day and 200-day moving averages for a few months, signaling continued bearish sentiment. However, it appears to be making an attempt to reclaim the 200-day moving average, which is currently just above the current price of $55.51. A sustained move above this level could indicate that the longer-term trend is stabilizing, but if it fails to hold, there is a risk of continued downside pressure.
Volume and Market Participation
Trading volume has been relatively stable, with occasional spikes. The largest volume surge happened around September, likely due to earnings or a major announcement. Since then, volume has tapered off but remains relatively consistent. There is no indication of extreme selling pressure, which suggests that while the stock has pulled back, investors are not aggressively exiting their positions.
In recent sessions, volume appears to be picking up slightly as the stock attempts to move higher. If this increase in volume continues alongside price gains, it could confirm renewed buying interest. However, if volume remains low on this bounce, it may suggest that the recovery lacks conviction.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart shows that HRB had been hovering near oversold territory for a while before beginning to recover. The RSI now appears to be rising, indicating improving momentum. Generally, when RSI moves back above 30 from oversold levels, it can signal a potential bottoming process.
However, the RSI is not yet in overbought territory, which means there is still room for the stock to move higher before hitting resistance. If the RSI continues its upward trend without getting too extended, it could support further price gains. On the other hand, if RSI stalls around the 50-60 level and starts rolling over, it may indicate a lack of strength in the current rally.
Support and Resistance Levels
The $50 level seems to have acted as a key area of support, with the stock bouncing from that region multiple times over the past few months. If the price fails to sustain above the 200-day moving average, there is a chance it could retest this support level. A break below $50 could open the door for further declines.
On the upside, immediate resistance is likely near $56-$58, an area where the stock previously struggled to hold gains. If the price can push through this zone with strong volume, the next major resistance would be around the $60-$62 range, where the 50-day moving average is trending.
Analyst Ratings
🔼 Upgrades
📈 Barrington Research recently reiterated an “Outperform” rating on H&R Block and raised the price target to $70. The firm pointed to the company’s strong financial performance and cost management strategies as key reasons for its optimism. Additionally, H&R Block’s expansion into digital tax services and small business solutions is seen as a long-term growth driver. Analysts believe these initiatives could provide steady revenue streams beyond tax season, justifying the increased price target.
🔽 Downgrades
⚠️ StockNews.com downgraded H&R Block from a “Buy” to a “Hold” rating, citing concerns about growing competition in the tax preparation industry. With more consumers shifting to DIY tax software and digital-first solutions, the company may face headwinds in maintaining its market share. While H&R Block remains a profitable and stable business, analysts expressed concern over its ability to sustain long-term growth at the same pace.
🎯 Consensus Price Target
The average price target for H&R Block currently stands at $62.33, reflecting a balanced perspective from analysts. While some see the company’s evolving business model as a growth opportunity, others remain cautious about competitive pressures and seasonal revenue reliance.
Earning Report Summary
H&R Block just released its latest earnings report, giving investors a look at how the company performed in the last quarter. There were some bright spots in the numbers, but also a few areas that raised questions.
Revenue and Earnings
The company pulled in $193.8 million in revenue, which was about 5% higher than the same quarter last year. That bump came mostly from more people using H&R Block’s tax services, both in-person and internationally. Despite the revenue growth, the company still reported a loss of $232.3 million, which was a bit worse than the prior year. That translated into a loss per share of $1.23, compared to $1.11 last year. While losses in the off-season aren’t unusual for a tax-focused business, it’s something investors are keeping an eye on.
Operating Costs on the Rise
Expenses were also up, hitting $422.1 million, largely because of higher wages for tax professionals. As tax return volumes increased, the company had to spend more on staffing, both in the U.S. and internationally. There were also some added costs from legal matters and corporate salaries, which contributed to the rise in expenses.
Stock Buybacks and Dividends
One thing investors will appreciate is that H&R Block continues to prioritize returning money to shareholders. The company bought back 3.3 million shares in the quarter, spending $209.6 million at an average price of $63.51 per share. There’s still $1.3 billion left in the company’s current share repurchase program, with no set expiration date.
On the dividend front, the company announced a quarterly payout of $0.375 per share, which will be paid in early January. H&R Block has been consistently paying dividends for over 60 years, and that track record is something long-term investors appreciate.
Looking Ahead
Even with the reported losses, H&R Block didn’t change its full-year guidance, which signals confidence in the company’s direction. Management seems to believe that its current strategies—expanding services and keeping up with market trends—will pay off.
Overall, the quarter had a mix of positives and negatives. Revenue growth is encouraging, and shareholder returns remain a priority, but rising costs and seasonal losses are still a factor. Investors will be watching closely to see how the company performs as tax season kicks into high gear.
Financial Health and Stability
On the surface, HRB looks like a well-run business with solid profitability. It has a healthy net profit margin of 14.7% and a return on assets of 17.25%, both of which point to efficient operations. The company has done a good job of turning revenue into actual earnings, which is always a plus for investors looking for stability.
However, the balance sheet tells a more complicated story. With a debt load of $2.68 billion and a current ratio of just 0.73, HRB doesn’t have a lot of wiggle room if financial conditions become challenging. Additionally, the company’s book value per share is in the red at -$6.52, which is a sign that aggressive share buybacks have significantly impacted its financial structure.
While strong cash flow helps offset these concerns, the company will need to carefully manage its debt to ensure it remains on solid ground in the long run.
Valuation and Stock Performance
HRB trades at 15.6 times trailing earnings, but its forward P/E of 10.8 suggests that the market expects solid earnings growth or that the stock is slightly undervalued. The PEG ratio of 0.87 also supports the idea that the stock could have room to run, particularly if earnings remain steady.
Looking at recent performance, the stock has been trending higher, currently trading around $56. That’s near the middle of its 52-week range of $45.87 to $68.45. The stock has outperformed the broader market over the past year, which is impressive for a company in a relatively mature industry.
One interesting aspect of HRB is its high level of institutional ownership, sitting at 97.4%. This suggests that large investors see value in the company and are confident in its long-term prospects. However, there’s also a significant short interest at 16.9% of the float, meaning there are skeptics betting against the stock as well.
Risks and Considerations
Seasonality and Revenue Dependence on Tax Season
The biggest challenge for HRB is that its earnings are highly seasonal. While efforts to expand into financial services help smooth out revenue, the company is still very reliant on tax season to generate the bulk of its profits. If there’s a downturn in tax filings or regulatory changes that impact the industry, it could affect earnings.
High Debt Load
Debt is another factor that investors should keep in mind. HRB has $2.68 billion in total debt, and while it has strong cash flow to cover interest payments, rising interest rates could increase borrowing costs over time.
Stock Buybacks and Financial Engineering
H&R Block has been aggressive with share repurchases, which has boosted earnings per share but also led to a negative book value per share. While buybacks can enhance shareholder value, they also limit the company’s ability to build up reserves or reinvest in growth initiatives.
Competition from Digital Tax Solutions
The rise of online tax preparation software, including TurboTax and other fintech-driven solutions, could pose a long-term challenge. HRB has its own digital offerings, but competition in the space is fierce, and pricing power may become a concern in the future.
Final Thoughts
H&R Block is a well-established company with a reliable dividend, strong cash flow, and a history of rewarding shareholders. Its combination of yield and dividend growth makes it an attractive option for income investors. However, its reliance on seasonal earnings, high debt levels, and aggressive buyback strategy introduce some risks that shouldn’t be overlooked.
For those who understand the cyclical nature of the business and are comfortable with its financial structure, HRB offers a solid balance of stability and income potential. The stock’s valuation remains reasonable, and its dividend growth history suggests management is committed to rewarding shareholders. That being said, keeping an eye on debt management and industry competition will be important moving forward.
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