H&R Block (HRB) has paid dividends for more than 200 consecutive quarters. Not only have the dividends been continuous, but they have been growing nicely as well. Since 2005, the dividend has grown at an average annual rate of 8%. Last year alone, the company increased the dividend by 33%.
The current yield now stands at 4.3%, which is significantly higher than the S&P 500 average. Since May of last year, H&R Block has been heavily committed to returning capital back to shareholders, the company has return nearly $900 million back in form of dividends and buybacks.
H&R Block is not only a great buy due to its yield, but the fact that investors can feel safe investing in the company. The company is one of the largest tax preparers in the world. It maintains a strong market share of around 16.4%, which is actually a 30bps increase from where it initially was. In addition to this, the industry is constantly growing. Management expects growth to be stable between 1%-2%. This is mainly due to an increase in population growth. H&R Block has also been taking digital market share away from companies such as Intuit. It's estimated that H&R grabbed nearly a 100bps in market share from Intuit and TaxAct.
H&R is also focusing on adding to the bottom line, but focusing on stronger saving initiatives that will help lower costs. Management has laid out a plan to save between $85 million - $100 million. The company has been shedding non-core assets such as its sale of RSM McGladrey and discontinuation of EXPRESSTAX. These assets were not large growth drivers for the company and by shedding them will add significant value. In addition to this, H&R has solved most of its pending litigation issues. All of these initiatives would mean at least an addition 30 cents per share.
The company has also been focusing on international growth lately. In Australia alone, H&R grew revenue by 11%. This increase in growth alone helped H&R beat analyst expectations for last quarter. Analysts were expecting a loss of 40 cents per share, while the company reported a loss of 37 cents. Please note that due to the seasonal nature of H&R's business, the company typical reports losses for similar quarters.
In a low interest rate environment such as this, investors often find themselves chasing yield. However, the issue is that this causes investors to go for riskier asset classes, which can have a damaging effect on your portfolio in the future. H&R is a stable company that is growing and will continue to take market share away from competitors. The tax preparation business is an industry that will always be around. H&R is a great company with a growing dividend. I recommend dividend growth investors should consider purchasing shares of H&R as they will be a great investment going forward.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.