As new laws and regulations make life more complicated, some
companies find a way to win under the changing landscape.
H&R Block (
) has seen the playing field change in two respects.
First, the company's savings and loan arm faced higher capital
requirements under the Dodd-Frank law. H&R responded by
putting its S&L arm on the block. A deal was in the works,
but Republic Bank recently backed out of the agreement. H&R
still intends to unload the unit.
Implementation of the new health insurance law is the second
factor. Initially there was speculation that many IRS refunds
that H&R Block navigates for its customers would be wiped out
by the ObamaCare's tax penalty for not having health insurance.
Human nature being human nature, H&R Block is more likely to
get the blame than the new law, or at least that was the
In September, H&R Block responded by reaching a deal with
GoHealth to develop an H&R Block-branded service to help
clients shop and enroll in a health care plan while determining
eligibility and applying for the government subsidy.
At the earnings call in September, CEO William Cobb said the
law will "not result in a materially positive impact to our
business in fiscal year 2014."
Still, the GoHealth deal essentially lessened fears of an
ObamaCare-related negative impact on H&R Block. Also,
ObamaCare is complicated and hard to understand, and that plays
to H&R Block's strength.
Because the fiscal fourth quarter ending in April is H&R
Block's moneymaking quarter, investors should focus on annual
EPS grew 25% last fiscal year on flat revenue. The Street
expects 11% growth this fiscal year and 16% in the following
year. Sales growth of 4% is expected both years.
The company's quarterly dividend is 20 cents a share, which
works out to an annualized yield of 2.9%. The dividend has not
been increased in the past eight quarters.