by Chuck Carlson, editor DRIP Investor
One certain result of the political horse-trading now in full swing in
Washington is a change to the tax code. And depending on negotiations,
the changes could be extensive.
One firm that could benefit from yet another tax overhaul is H&R Block (HRB). The company is one of the world's largest tax-services providers. And the stock is a holding in our Editor's Portfolio.
Block's reach is impressive:
- Block prepares 1 in every 7 U.S. tax returns.
- The firm has a retail office within 5 miles of most Americans.
- Block files 1 in every 5 Earned Income Tax Credits.
stock has performed well of late and is trading around its 52-week
high. Wall Street no doubt believes that changes to the tax code will
fuel increased demand for the company's services.
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stock is also benefiting from improved results in recent quarters. The
firm has beaten Wall Street's consensus earnings estimates in each of
the last two quarters.
For fiscal 2013 ending in April, the
consensus profit estimate is $1.68 per share, up from $1.28 in the year
earlier. Growth should continue in fiscal 2014, with the current
estimate of $1.82 per share.
The stock is also benefiting from investors' thirst for dividends. H&R Block stock currently yields more than 4%.
[Related -H&R Block, Inc. (HRB) Posts 4Q Profit, Revenue Up 10 Pct]
the hefty yield, the annual indicated dividend of $0.80 per share seems
well covered by earnings. In fact, a dividend hike would not be
surprising in 2013.
Block stock has had its ups and downs over
the years. The firm's foray into mortgages ended rather badly, which
hurt these shares. The stock traded in the $30s in 2004 and 2005 and the
high $20s in 2008, so the shares have plenty of upside potential.
enhancing potential is the takeover prospects of the company, although
these shares have merit even if no takeover develops.
the stock's volatile track record, these shares are not for conservative
investors. But more aggressive investors looking for a nice combination
of yield and growth potential, not to mention a stock with some
interesting catalysts in 2013, should give these shares special