H&R BLOCK INC (NYSE:HRB) – A Reliable Dividend Stock Worth Considering

H&R BLOCK INC (NYSE:HRB) stands out as a strong candidate for dividend investors, according to our Best Dividend Stocks screener. The company combines a solid dividend profile with healthy profitability and reasonable financial health, making it an appealing option for income-focused portfolios.

Dividend Strength

• Attractive Yield: HRB offers a dividend yield of 2.64%, which is slightly above the S&P 500 average of 2.34%. While not the highest yield available, it remains competitive within its industry.
• Reliable Payout History: The company has maintained dividend payments for at least 10 consecutive years without reductions, demonstrating a commitment to returning value to shareholders.
• Sustainable Payout Ratio: HRB’s payout ratio sits at 34.30%, well below the threshold that could signal risk. This indicates that earnings comfortably cover dividend obligations.
• Modest Growth: Dividends have grown at an annualized rate of 4.72%, suggesting steady, if not explosive, increases over time.

Profitability Supports Dividends

HRB earns a Profitability Rating of 8/10, reflecting strong financial performance:

• High Margins: The company boasts an Operating Margin of 21.75%, outperforming 90% of its industry peers.
• Strong Returns: With a Return on Invested Capital (ROIC) of 38.40%, HRB efficiently generates profits from its capital investments.
• Consistent Earnings: The firm has been profitable in four of the past five years, reinforcing its ability to sustain dividends.

Financial Health Considerations

While HRB’s Health Rating of 5/10 suggests some caution, key strengths remain:

• Solvency: The company’s Altman-Z score of 3.02 indicates low bankruptcy risk, and its debt-to-FCF ratio of 2.30 is manageable.
• Liquidity Concerns: A Current Ratio of 0.78 raises short-term liquidity questions, though long-term solvency metrics remain stable.

Valuation Looks Reasonable

HRB trades at a P/E ratio of 12.56, below both industry and S&P 500 averages, suggesting the stock is undervalued relative to earnings.

For a deeper dive into HRB’s fundamentals, review the full report here.

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Disclaimer

This is not investment advice. The observations here are based on current data, but investors should conduct their own research before making decisions.