Thursday, June 07, 2007

H&R Dividend Bluff

H&R Block (NYSE:HRB) announced a dividend increase of 6%. Sounds good? The company wants you to know that this is the tenth consecutive year that the dividend has increased. In the same press release they also mention that this will be the 180 consecutive quarter where a dividend was paid. Given four (4) quarters per year that's about 45 years. Long term approach is nice but in this case no longer appropriate.

Earnings will be released on the morning of June 21. But the board feels confident enough on what I could only believe is the advice of management to increase the dividend a full two weeks before they can actually inform the market of what the real results are. Hmmm Cart in front of the horse?

Here is the real kicker. The dividend increase is payable to shareholders of record Sep 10, 2007 and will be paid on Oct 1. The record date is 90 days following the announcement of its payment. Sounds like they want the dividend valuation to be deeply embedded in the stock price before they come out with full disclosure.

So far H&R has been losing cash and has been relying on borrowings. Last quarter their current ratio was negative. Hey isn't this the stock that Buffet kicked out presumable for being unworthy. Look for tough news on the upcoming earnings release and conference call. The dividend increase is just a pre-headache medication.