H&R Block: Steady Dividend, Stock Buybacks, and AI Integration

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H & R Block (HRB, Financial), a recent addition to our Yield Leaders rankings, has been actively buying back stock while maintaining a consistent dividend for decades. This tax prep, financial products, and small business systems provider deserves a closer look due to its commendable attributes.

  • HRB owns TurboTax, a DIY tax filing software. TurboTax drove strong paid volume growth last quarter, thanks to its user-friendly interface and ease of use, outpacing the broader DIY category and capturing more market share.
  • HRB's AI-powered Tax Assist function has boosted market share gains. This AI tool can answer complex tax questions better than traditional chatbots, enhancing the tax prep process and increasing client conversion rates.
  • AI is also aiding future revenue growth in HRB's Assisted segment. Many clients who started tax prep in physical offices did not complete it. HRB is using AI to improve call center operations and customer experience, with a focus on increasing Assisted volumes in FY25.
  • While U.S. tax prep makes up nearly three-quarters of HRB's annual revenue, the company is diversifying its income streams. HRB offers various financial products, including Block Horizons for small business taxes and payroll, Wave for similar services, and Spruce, a mobile banking offering.

HRB may not offer the highest dividend yield or the excitement of AI stocks hitting all-time highs, but it provides a historically stable dividend. The company has aggressively bought back $350 million in stock, or 5.5% of its outstanding shares, in the first half of the year. HRB's AI integration, especially in its DIY tax prep services, could enhance its market position and boost its Assisted segment. A 15-20% stop loss is recommended.


I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.