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Dicker Data declines to upgrade profit guidance, but I’m still banking on shares

The Dicker Data Ltd (ASX: DDR) share price is up more than 130% to $6.99 in just the past year and even more when you include the 21.4 cents per share plus full franking credits it has also dished out over the period. 

I’ve regularly recommended the company as a good dividend pick over the last three years thanks to its strong track record and heavy insider ownership, among other factors. On a trailing basis the yield is only 3%, but given the company is tracking well ahead of its calendar 2019 profit guidance it seems likely that dividends will climb into the future. 

The company reports on a calendar year basis and previously guided for profit before tax of $51.2 million over 2019, but delivered $32.3 million in profit before tax over just the six months to June 30, 2019.

In other words it looks on track to blow a long way past its full year profit guidance and today told the market “profit guidance will be reviewed once Q319 results are finalised.”

It did also caution that it expects to take on higher costs over the second half of 2019 and that some US vendors were seeing uncertainty in the global economy, but I still expect the company will deliver a profit guidance upgrade sometime in October 2019.

Under ASX listing rules once a company becomes aware that its actual financial results may vary materially either higher or lower from prior guidance it’s obliged to update the market to maintain its continuous disclosure obligations. 

Arguably Dicker Data’s strong 2019 is already priced into the $6.99 valuation, but if it can maintain close to double-digit growth rates over the long term the stock will keep offering strong total returns in my opinion.

Another major positive in my view is that the COO keeps buying more shares in the business. In August 2019 picking up 20,000 shares at $6.90 each. Generally, company insiders don’t buy shares if they expect them to go down and Dicker Data’s COO already held around 664,000 shares prior to buying on market. Maybe the COO himself is guessing we may see a profit upgrade later in the year. 

At the other end of the spectrum another company I’ve regularly suggested for dividend seekers is footwear retailer Accent Group Ltd (ASX: AX1). Today it announced one of its directors had sold around $2 million worth of shares. I still remain generally positive on Accent shares though, with the stock up 42% in 2019.

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Motley Fool contributor Tom Richardson owns shares of Accent Group and Dicker Data Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Accent Group. 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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