H&R Block Declares Dividend Ahead of Earnings

The tax company announced dividend yielding over 5%

Mar 5, 2021 at 10:35 AM

On Wednesday, March 3, tax company H&R Block, Inc. (NYSE:HRB) declared a quarterly cash dividend of $0.26 per share payable on April 1 to shareholders of record as of March 16. The company’s forward dividend currently stands at $1.04 and HRB has a dividend yield of 5.27%. H&R Block has paid quarterly dividends consecutively since going public in 1962.

Block, as its affectionately known to customers, is scheduled to report its fiscal third quarter earnings on Tuesday, March 9, after the close. Analysts anticipate that HRB will be reporting an earnings per share (EPS) of -$1.29 in the upcoming report.

Over the past four quarters reported, H&R Block has managed to beat earnings expectations on just two occasions. And as far as post-earnings reactions, only three have been positive the last eight quarters. Overall, HRB averages a post-earnings move of 4.9%, regardless of direction. This time around, the options market is pricing in a much larger-than-expected move of 9%.

On the charts, HRB has been stymied by the $20 level in recent months. Up 23.5% already in 2021, a round of short covering could help the shares blow past that ceiling. Short interest fell 11% in the two most recent reporting periods, yet the 16.35 million shares sold short still takes up 9% of HRB's total available float. At the stock's average pace of trading, it would take shorts over a week to buy back their bearish bets.

From a fundamental point of view, H&R Block stock is far from a reliable investment at this point in time. The company has seen a decline in revenues and net income since 2018. HRB's sales and profits have both decreased well over $400 million since 2019. Additionally, H&R Block reported more than $7 million in net loses for the fiscal year of 2020. On top of all of that, HRB carries the burden of a $2.02 billion debt load.

H&R Block stock does offer some opportunity as a turnaround play. HRB has an extremely low forward price-earnings ratio of 6.86. However, its success will largely be dependent on the company’s ability to adapt with current times, or H&R Block will continue giving up market share to new competition.

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