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Dicker Data Ltd lifts its dividend: Should you snap up this dividend star?


In morning trade the Dicker Data Ltd (ASX: DDR) share price has fallen 1% to $2.79.

Despite today’s decline, Dicker Data’s shares have provided a 12-month price return of almost 14%. This extends to over 19% when you include its dividend.

Why are its shares lower today?

This morning the wholesale distributor of computer hardware and software released its sales, earnings, and dividend guidance for FY 2018.

According to the release, the company has forecast revenue of $1,380 million and net profit before tax of $42.5 million.

This represents year-on-year top line growth of 6% and will be driven by strong growth from its Australian operations.

Sales in Australia are expected to grow 10% to $1,295.1 million during the year, offsetting a sizeable decline in sales from its New Zealand business. This will be driven through organic growth and the introduction of new vendors.

Sales in New Zealand are expected to come in 29% lower at $93.5 million due to the loss of the Cisco business in the country.

Management’s profit before tax guidance also means 6% year-on-year growth. The highlight again will be profit growth of 11% to $40.6 million in Australia, offsetting a 45% decline to $1.9 million in New Zealand.

As a result of its forecast, management has advised that it intends to pay a fully franked 18 cents per share dividend in FY 2018. This will be a 9.8% increase on FY 2017’s dividend and will continue to be paid in quarterly instalments.

Based on the current share price this equates to a forward yield of almost 6.5% for Dicker Data’s shares.

Should you invest?

I suspect that investors may be a little disappointed with its guidance for profit before tax growth in FY 2018. Whilst this will be slower than the 9.9% it achieved in FY 2017, I think it is a solid result given the loss of Cisco in New Zealand.

Furthermore, the yield on offer here is well above average and very attractive in my opinion for income investors.

Because of this, I think Dicker Data would be a great investment alongside other dividend stars such as Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd. (ASX: NAB).

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Returns As of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Telstra Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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