The Dicker Data Ltd (ASX: DDR) share price will be one to watch on Tuesday after the leading wholesale distributor of computer hardware and related products released its half year results after the market close.
For the six months ended June 30, Dicker Data posted a 13.5% increase in revenue to $717.6 million, an 11.9% lift in operating profit before tax to $21.75 million, and a 21.9% jump in net profit after tax to $15.8 million. Dicker Data’s net profit after tax was given a boost from a credit for remission of a franking deficit tax which was provisioned for in FY 2017 financial statements. Earnings per share increased 21.5% to 9.84 cents.
The strong top line performance was driven by growth in both established vendors and new vendors in the company’s Australia segment. Revenue in Australia grew 19.1% to $678.8 million, offsetting a 39.3% decline in revenue to $38.7 million in its New Zealand segment. The latter was impacted by the loss of the Cisco business last year.
The strong first half puts Dicker Data well on its way to achieving its FY 2018 guidance of revenue of $1,388.6 million and net profit before tax of $42.5 million. In fact, management stated that it expects to achieve its guidance in its outlook statement.
Which is where it revealed that its outlook for the second half is positive thanks to management’s strategy of playing to its strengths to drive strong profitable revenue across its key pillars – Hybrid IT, IOT, Digital Transformation and Wireless Technology.
This is expected to be supported by emerging markets. Whilst management acknowledges that these markets have their own challenges, it believes they represent huge opportunities for the company and its customers.
No dividend was declared in today’s results as it was previously announced to the market on August 14. That quarterly dividend of 4.4 cents per share brought its year to date total dividend to 8.8 cents per share.
This puts the company on track to pay out an 18 cents per share dividend in FY 2018 as previously planned. Which equates to a fully franked yield of 5.9% based on today’s close price.
Should you invest?
I believe this result demonstrates why Dicker Data is one of the best dividend shares on the Australian market along with the likes of National Storage REIT (ASX: NSR) and Rural Funds Group (ASX: RFF).
I estimate that its shares are changing hands at under 16x annualised normalised earnings (removing the one-off credit), which I think is very attractive growing its profits before tax at around 12%. I would class it as a buy.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
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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 RURALFUNDS STAPLED. The Motley Fool Australia has recommended National Storage REIT. 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.