Tax Time: Bet on Block
03/06/2015 8:00 am EST
The shares of this tax preparer are receiving a tailwind from a tax season that is likely to be more challenging for individuals as a result of a number of tax-law changes and regulations surrounding Obamacare, observes Chuck Carlson, editor of DRIP Investor.
H&R Block (HRB) also got a boost when one of its primary competitors in the industry, TurboTax software, ran into a number of problems, including potential criminal attempts to obtain refunds through its systems.
Last year, TurboTax products were used to prepare 29 million returns and Block is no doubt hopeful that some of those 29 million returns will find their way to Block this tax season.
Block has been a long-time holding in my Editor’s Portfolio, with varying degrees of success over the years. The fact that the firm has millions of customers—the company prepared more than 24 million returns in 2014—has always given these shares special appeal as a potential takeover play.
The stock, yielding 2.3%, also offers a decent dividend stream. It is not likely that tax simplification will ever be a concept adopted in the US, which is good news for Block.
It would not be surprising to see these shares go through a bit of a post-tax-season lull, so you might be able to get them a bit cheaper by waiting until the second quarter. However, long-term, I see these shares moving higher and like their total-return potential.
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