This morning the Dicker Data Ltd (ASX: DDR) share price climbed 5% to a record high of $3.58 after the IT hardware distribution business provided the market guidance for fiscal 2019.
Dicker Data reports on a calendar year basis and told investors to expect net profit before tax for 2019 of $51.4 million on revenue of $1.65 billion, which would represent growth of around 10% and 11% respectively on the prior year.
The next three quarterly interim dividends out to December 2019 are also expected to be a fully franked 5 cents per share to suggest the group should deliver at least 21 cents per share in dividends over the 12 months ahead including a final dividend on my estimates of 6 cents per share.
That would give it a yield of 5.9% plus franking credits on the forward estimate of a 21 cents per share total payout, although it’s worth noting the final dividend could come in slightly higher than my own 6 cents estimate.
For income seekers Dicker Data is a stock I’ve regularly recommended over the last few years in the belief it was undervalued for a number of reasons including a lack of liquidity and consequent lack of institutional investment or analyst coverage.
I even named it as my top stock pick for February 2019 and among 10 shares I’d buy for 2019 when it sold for around 26% less at $2.85 just a couple of months ago.
Others on that top 10 list that have made the 26% return of Dicker Data look almost pathetic since then, including Nearmap Ltd (ASX: NEA) and Afterpay Touch Group Ltd (ASX: APT) that have both come closish to doubling over the last couple of months.
If I didn’t own a reasonable weighting in Dicker Data already I’d be comfortable buying shares up to $3.60 as the forecast yield (5.9% plus franking) is probably sufficient compensation for the risk at these prices.
Moreover, I expect this founder led and well run business has potential to deliver steady profit growth into 2020 and beyond thanks to growing demand for IT hardware and the skinny profit margins that lessen competition in its space.
As such Dicker Data is far from a ‘perfect’ business with plenty of risk around its business model, but it could still offer dividend seekers in particular strong total returns on a 3 to 5-year view.
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You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Nearmap Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.