H&R Block Shares Soar on Dividend Hike, Earnings
June 9, 2016
H&R Block Hikes Dividend 10%
While few of us like to think about the IRS, there is one tax story you might like.
On Thursday, shares of H & R Block Inc (NYSE:HRB) soared seven percent after reporting better-than-expected earnings. The tax services company posted a fourth-quarter profit of $700.7 million, or $3.13 a share. This compared to $738.8 million, or $2.66 a share, during the same period a year earlier. (Source: “H&R Block Announces Fiscal 2016 Results and Dividend Increase,” H&R Block Investor Relations, June 9, 2016.)
Management also raised the company’s quarterly dividend by 10% to $0.22 a share. In a press release to shareholders, executives committed to an annual review of the company’s distribution policy. The move is a big hint of more dividend hikes coming in the months ahead.
“Going forward, the company is committed to an annual review of its dividend following the end of each fiscal year,” said Bill Cobb, president and CEO of H&R Block. (Source: Ibid.)The company’s earnings release adds, “Future actions regarding dividends will be dependent upon the board’s approval following consideration of operating results, market conditions, and capital needs, among other factors.” (Source: Ibid.)
For shareholders, the dividend hike is a big vote of confidence in the business. H&R Block’s tax preparation business has been challenged recently, hammered by a consumer shift toward do-it-yourself tax solutions. Rivals, like Intuit’s “TurboTax” software, have also eaten into the company’s market share.
In the conference call, however, Cobb promised new initiatives would put a floor under the company’s revenue. Management is confident cost cuts and other growth initiatives will boost financial results in the coming year.
“We are ready to move on. Going forward, we are committed to arresting the client decline and ultimately achieving client growth,” Cobb said. “We are developing aggressive plans for tax season 2017 that we believe will enable us to achieve this objective.” (Source: Ibid.)
Exactly what those initiatives are, though, remains to be seen. Management discussed few explicit details, promising instead to provide specifics at the company’s upcoming shareholder meeting. For analysts, it means waiting until December before seeing a concrete turnaround plan.
