If we know that death and taxes are the only certain aspects in an uncertain world, why not look to make some money off of that? These companies have my interest for both dividend income and straight long positions.
H&R Block (HRB) is far and way the largest tax preparation firm in the nation and its position only strengthened when in May its distant number two competitor, Jackson-Hewitt, filed for Chapter. 11. As a stock, the company has been hammered and that's nice for the long-term investor looking to buy on the cheap. This past Friday, the company posted what the street found to be disappointing earnings and knocked another 10% off the already depressed share price. However, upon closer inspection, one finds that the earnings miss was largely due to a non-cash charge in this seasonally slow quarter. The stock is yielding 4.5% with a payout ratio right near 50%, meaning that not only does the dividend look safe, but has room to grow as the management has been good at rewarding shareholders over the years. I like the company at 1x price/sales, giving me an entry point at $12/share.
Intuit (INTU) is unquestionably the dominant company when it comes to tax preparation software (Quicken) and various business/financial management solutions. While not as much a value play as H&R Block, it still has some strong points. While the yield is considerably lower at 1.3%, the company has been giving back to shareholders more through stock buybacks. During INTU's most recent quarter, INTU repurchased $250 million in stock, bringing fiscal year 2011 total repurchases to approximately $1.4 billion or 10% of the total stock. INTU approved a new $2 billion stock repurchase program through August 2014, which shows strong belief in the company and great price support going forward. I think a good entry point for this well run stock is at 3x price/sales, translating into $40/share.
Stonemor Partners (STON) engages in the ownership and operation of cemeteries and funeral homes. Currently STON has 260 cemeteries and 58 funeral homes in 27 states and Puerto Rico. This provides a diverse revenue stream. The thing to like the most about this company is its 8.2% dividend yield, which has been rising since going public in 2005. The stock likes to issue shares to raise capital for acquisitions from time to time; with the stock at almost 2.75x book value, that means STON will enhance book value greatly on STON's upcoming share offerings. I like the stock at a 9% dividend yield to compensate for its higher risk, giving me an entry point at $26/share.
Service Corporation International (SCI) is the largest funeral home operator in the nation with 1,254 funeral service locations and 372 cemeteries. It has a much lower dividend yield than Stonemor, a still respectable 2.1%. It has a much cleaner balance sheet and trades at 1x price/sales and 1.5x price/book. I like this at a 2.5% dividend yield, giving me an $8/share entry point.
Stewart Enterprises (STEI) operates 218 funeral homes and 141 cemeteries and sports a healthy 2.4% yield and the value metrics look compelling at just over 1x price/sales and 1.2x price/book. It has a trailing 12-month p/e just below 16. I like this at a 2.5% dividend yield, giving me a $5.50/share entry point.
Carriage Services (CSV) is the smallest funeral operator of the bunch, but that doesn't mean it's not worth an investment. It currently operates 147 funeral homes in 25 states and 33 cemeteries. The dividend yield is the smallest of the four at 1.8%, but the company just initiated this and has been looking more towards growth, which is understandable. The valuation metrics look compelling as it's trading at just .8x price/book, almost .5x price/sales, and just 12x p/e. I like this at a 2% dividend yield, giving me a $5/share entry point.