Published Wed, 16 Sep 2020 12:19:15 -0400 on Seeking Alpha
Seeking AlphaDividend Ideas | Services H&R Block Will Prove The Security Of Its Dividend In The Next 90 DaysSep. 16, 2020 12:19 PM ET|| About: H&R Block, Inc. (HRB), Includes: INTUby: Skeptical Otter ResearchSkeptical Otter Research Long/Short Equity, event-drivenSummaryHRB’s current dividend is secure even with pessimistic growth assumptions.
Tax law changes & online represent strong growth opportunities.
3 key events in the upcoming months will validate this thesis.
Is HRB’s yield safe?
I love contrasts. Stocks so weird that surely someone has to be wrong. Consider your favorite neighborhood tax preparer, H&R Block (HRB). HRB’s dividend page on Seeking Alpha is a study in contrasts. An exceptional yield tainted by concerns around safety & growth.
Source: Seeking Alpha
As I’ll show through this article, standard models aren’t handling HRB’s pandemic measures such as drawing on their credit as well as the pandemic related revenue shift. While there are strategic concerns around revenue growth & legal risks, this has generated a discount excessive to the risks that should resolve in the near to medium term. HRB is willing to pay you, the investor, 6.94% to wait.
How did we get here?
HRB is best understood as an annual stock. While they do offer products & services beyond seasonal tax preparation, these lines of business account for less than 10% of revenue which I will cover in the next session. Instead the vast majority of revenue occurs during filing season which aligns to HRB’s Q4. Here’s the prior 5 years per the 10k.
From 2016-2019 we see a remarkably stable revenue ($3B) & income ($400-500M). Against this backdrop, it’s intriguing to see the stock price chart against both the S&P 500 and tax preparation titan Intuit (INTU).
Source: Seeking Alpha
The levels of market hate for HRB shown in this chart is staggering. HRB investors were cut in half... Read more
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