For investors looking for a dependable source of passive income, a methodical process for choosing dividend stocks is important. One useful technique involves searching for companies that provide a good yield and also show the financial capacity to maintain and possibly increase their dividends. This method focuses on quality by seeking stocks with high dividend ratings, which are combined scores assessing yield, growth, history, and payout security, while also needing a minimum level of acceptable profit generation and financial soundness. This removes companies where a high yield could be misleading due to a falling stock price or weak business foundations.
H&R BLOCK INC (NYSE:HRB) appears as a notable candidate from this careful search process. The tax preparation company presents a profile that matches the central principles of cautious dividend investing, joining a solid current yield with a history of consistency and a price level that seems reasonable.
A Notable Dividend Profile
The central element of HRB's attraction for income-oriented investors is its very high dividend rating of 9 out of 10. This score comes from several favorable elements working together:
- Good Yield: The stock now provides a yearly dividend yield of 5.45%. This is much higher than the average yield of the S&P 500 (about 1.80%) and is notable in its own sector, where the average yield is only 0.40%.
- Dependable and Increasing Payments: HRB has built a consistent history, having paid and, critically, not cut its dividend for at least ten straight years. Also, the company has increased its dividend at an average yearly rate of 6.79% over the last five years, showing a dedication to giving more capital back to shareholders.
- Secure Payout Ratio: A vital test for any dividend stock is the payout ratio, the part of earnings given as dividends. HRB's ratio is at a manageable 33.68%, showing the company keeps a large part of its earnings for reinvestment, debt payment, or other needs. This low ratio gives a good cushion, meaning the current dividend is likely safe even if profits decrease for a time.
Supporting Business Foundations: Profit Generation and Soundness
A high dividend is only as secure as the company that provides it. HRB's dividend strength is supported by firm scores in profit generation (8/10) and acceptable financial soundness (5/10), which are important for the lasting continuation of the income.
Profit Generation Strength: The company's business is very efficient. Its Return on Invested Capital (ROIC) of 29.00% is excellent, putting it near the best in its industry and showing effective use of capital to create profits. In the same way, good profit and operating margins further prove the company's capacity to turn revenue into earnings, which is the final origin of dividend payments.
Satisfactory Financial Soundness: While not the top rating, a soundness score of 5 meets the "acceptable" level needed by the search method. The review indicates HRB is building value, as its ROIC is above its cost of capital. The company has also been lowering its share count and handling its debt level relative to past years. Liquidity measures, like its current and quick ratios, match sector averages, suggesting it can cover its near-term debts. These points together show a financial position that, while having some debt, is not a direct worry for dividend security.
Price and Expansion Background
The search process frequently finds stocks that are not widely noticed or are priced low by the market. HRB sells at a Price-to-Earnings (P/E) ratio of only 6.29 and a forward P/E of 5.20, which is low compared to the general market and many similar companies. This price level implies the market may have included worries about the company's long-term expansion potential in a possibly shifting tax environment, thus providing a higher yield in return.
On expansion, HRB displays a varied situation. While past earnings per share (EPS) expansion has been good, future sales expansion projections are limited. This highlights the investment idea: HRB is not a rapid-expansion narrative but instead a steady, profit-making business selling at a low price and distributing a big part of its regular profits directly to shareholders.
Conclusion
For dividend investors using a quality-and-security-focused method, H&R BLOCK INC is a clear example. It rates well on the particular measures important for lasting income: a secure yield, a long record of dependable and rising payments, and good core profit generation. The satisfactory financial soundness rating gives confidence, while the low price offers a degree of protection. Investors are effectively receiving a sizable 5.45% yield to own a profitable company with a leading seasonal operation, all while anticipating the market to possibly reconsider its steady profit-making capacity.
A full review of HRB's fundamental analysis, including its complete ratings for expansion, price, soundness, profit generation, and dividend, is available in its detailed fundamental report.
Interested in reviewing other stocks that fit similar standards for good dividends, profit generation, and soundness? You can use the "Best Dividend Stocks" screen to view the complete list of present candidates by using this link: Best Dividend Stocks Screen.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on data and sources believed to be reliable, but its accuracy cannot be guaranteed. Investors should conduct their own independent research and consider their individual financial circumstances and risk tolerance before making any investment decision.
