H&R Block, Inc. (HRB): The Best Investment in Tax Preparation

What many taxpayers might not yet realize is that with TurboTax, doing your taxes simply requires typing numbers into boxes. All the calculations are done for you. Despite both H&R Block and Intuit offering tax service software, this is a big advantage for Intuit. TurboTax is a well-known name throughout the United States.

If H&R Block wants to catch up online, it’s going to require a major marketing effort. This presents a dilemma because H&R Block is currently cutting costs in order to improve the bottom line. At the same time, the only way to compete over the long haul is to become more recognized as an online brand.

If you want to take a different angle by investing in a company that offers tax services for small to medium-size businesses in the United States and Germany, then consider Paychex, Inc. (NASDAQ:PAYX).

The company’s revenue increases on an annual basis, and it always delivers profits. It also has more than $550 million in cash and no debt. This keeps Paychex, Inc. (NASDAQ:PAYX)’s dividend safe, and considering the yield is currently 3.60%, it’s a nice bonus to any stock appreciation.

All three companies have strong balance sheets, but only two companies offer a dividend yield above the industry average of 1.83% — Paychex at 3.60% and H&R Block at 2.80%. Intuit currently yields 1.20%.

Conclusion

Despite Intuit Inc. (NASDAQ:INTU) offering the lowest yield, it’s likely to be the best long-term performer of the group thanks to TurboTax’s brand recognition and the continuing momentum toward do-it-yourself tax preparation.

H&R Block, Inc. (NYSE:HRB) might be performing well now, but it’s behind industry trends, which limits its long-term potential.

The article The Best Investment in Tax Preparation originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Intuit and Paychex. The Motley Fool owns shares of Intuit. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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