June 30 (Bloomberg) -- H&R Block Inc., the biggest U.S. tax preparer, reported its first quarterly profit in two years after selling the loan-servicing unit to Wilbur Ross's firm. The firm gained 2.8 percent in New York trading after boosting the dividend and announcing a $2 billion share repurchase plan.

Fourth-quarter net income was $543.6 million, or $1.66 a share, compared with a loss of $85.6 million, or 26 cents, a year earlier, the Kansas City, Missouri-based company said today in a statement. Income from continuing operations was $691.1 million, beating the $667 million average estimate of three analysts surveyed by Bloomberg.

Chairman Richard Breeden, a hedge fund manager and former head of the U.S. Securities and Exchange Commission, has said he wants to gain 55 million new tax preparation customers in a ``major assault'' on the industry. Breeden closed a $1.3 billion sale of H&R Block's mortgage servicing unit to WL Ross & Co. in May, completing the company's exit from a subprime mortgage business that caused more than $1 billion in losses.

``This marks a return and perhaps signals that the worst is behind the company,'' said Alexander Paris Jr., research director at Barrington Research Associates in Chicago, who has a ``market perform'' rating on H&R Block. ``They announced a truly massive share repurchase plan.''

H&R Block increased its annual dividend by 3 cents a share to 60 cents. The repurchase program may start in 2009, the company said. Earnings from continuing operations will probably be $1.60 to $1.70 in the year through April 30, the company said.

H&R Block gained 58 cents to $21.40 at 4:15 p.m. in New York Stock Exchange composite trading. The company has dropped about 8.4 percent over 12 months.

``We are confident that for the three-year horizon through fiscal 2011, we can realize significant gains in earnings per share,'' interim Chief Executive Officer Alan Bennett said in the statement.

Mortgage Losses

In the previous seven quarters, H&R Block racked up $1.29 billion in losses as writedowns tied to its mortgage business mounted. The deal followed the shuttering of H&R Block's Option One Mortgage Corp., a subprime lending business, last year. The company was the eighth biggest U.S. subprime lender in 2007, according to trade publication Inside Mortgage Finance.

Net tax preparation fees advanced 8.9 percent during this year's filing season to almost $2.8 billion, H&R Block said in May. From April 1 to April 17, the company took in $537.9 million in fees, an 11 percent increase from a year earlier.

H&R Block had 19 percent of the market for tax returns in 2007 followed by Jackson Hewitt Tax Service Inc., which had 4 percent, and No. 3 Liberty Tax Service, a closely held firm with 1.5 percent, according to Goldman Sachs Group Inc. analyst James Fotheringham. Independent providers make up the majority of the market.

-- With reporting by Ari Levy in San Francisco. Editors: Dan Kraut, Gregory Mott

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net.

Last Updated: June 30, 2008 16:19 EDT