H&R Block (NYSE:HRB): A Top Dividend Stock for Dependable Income

Using a methodical process to find good dividend stocks can help investors create a dependable income source while controlling risk. The "Best Dividend Stocks" screen uses particular filters to reduce the list of possible choices, requiring stocks to have a ChartMill Dividend Rating of 7 or higher, which confirms good dividend traits. It also requires a minimum Profitability Rating of 5 and a Health Rating of 5, verifying the company is financially stable and profitable enough to maintain its distributions. This multi-layered screening helps prevent the typical mistake of high-yield traps, stocks where appealing yields are frequently a sign of deeper business issues or a fast-falling stock price. H&R BLOCK INC (NYSE:HRB) appears as a stock that satisfies these strict conditions, justifying more attention from investors focused on dividends.

Dividend Profile Analysis

The foundation of any dividend investment case depends on the sustainability and appeal of the dividend. H&R Block shows a strong profile in this area, receiving a high ChartMill Dividend Rating of 8. The company's dedication to giving value to shareholders is evident from its long and steady history.

• Good and Increasing Income: The stock provides a good yearly dividend yield of 3.65%, which is positive next to the industry average (2.07%) and the wider S&P 500. Also, the company has a pattern of regularly raising its payout, with an average yearly dividend growth of 6.79% over recent years.
• Established History: Steadiness is important for dividend investors, and HRB delivers it. The company has both paid and has not reduced its dividend for at least 10 straight years, establishing a solid record of shareholder returns.
• Maintainable Distributions: A key measure for dividend maintenance is the payout ratio. HRB distributes 33.41% of its earnings as dividends, which is a very manageable and maintainable level. This provides plenty of capacity for the company to fund business investments and handle economic challenges without putting the dividend at risk.

This good dividend profile directly matches the screening method's aim of locating companies that provide not only a high yield, but a dependable and increasing income source supported by a maintainable business model.

Profitability and Financial Health

A solid dividend is only as reliable as the company's capacity to pay for it. The screening method emphasizes adequate profitability and financial health for this specific reason, and H&R Block's basic financials back its dividend commitment. The company has a high ChartMill Profitability Rating of 8, signaling strong earnings capacity.

• Outstanding Returns: The company produces excellent returns on its investments, with a Return on Invested Capital (ROIC) of 35.30%, ranking it at the top of its industry. A good Profit Margin of 16.10% further confirms its effective operations.
• Financial Health Points: The company gets a ChartMill Health Rating of 5, signaling a satisfactory but varied financial state. Positively, HRB has a good solvency position with an acceptable debt-to-free-cash-flow ratio and a safe Altman-Z score, indicating no short-term bankruptcy concern. Still, investors should be aware of its lower liquidity, shown in Current and Quick Ratios under 1, which might signal possible difficulties in covering immediate liabilities, although this is typical for companies with very seasonal operations like tax preparation.

These elements are important because a very profitable company is better prepared to continue and raise its dividend, while a satisfactory degree of financial health makes sure it is not carrying too much debt, safeguarding the dividend during economic pressure.

Valuation and Growth Context

For investors seeking value and dividends, the price paid for a stock is important. H&R Block seems fairly valued, trading at a Price-to-Earnings (P/E) ratio of 9.74, which is much lower than the S&P 500 average. This implies the market might be pricing its steady earnings and dividend-paying ability too low. Looking forward, analysts project earnings per share to increase by about 12.47% per year, which could support future dividend raises. While sales growth has been slow, the mix of a low valuation and satisfactory earnings growth potential makes HRB an interesting option for investors wanting both income and possible share price growth.

A more complete summary of all these basic factors is in the full H&R Block Fundamental Analysis report.

Conclusion

H&R Block makes a strong argument for dividend investors, fitting well with a method that emphasizes dependable income, maintainable distributions, and basic financial stability. Its good and increasing yield, supported by a long payment history, good profitability, and a fair valuation, makes it notable. While its liquidity numbers need watching, its general financial health and outstanding profitability offer a stable base for its dividend policy. For investors aiming to create a collection of good dividend-paying companies, HRB represents the kind of stock a systematic screening process can find.

This evaluation of H&R Block was found using a particular dividend screening method. If you want to examine other companies that satisfy similar standards for good dividends, profitability, and financial health, you can check the present results by going to the Best Dividend Stocks screen.

Disclaimer: This article is for informational purposes only and does not constitute investment advice of any kind. All investment decisions carry risk, and you should conduct your own thorough research or consult with a qualified financial advisor before making any investment decisions.