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Dicker Data share price up on special dividend & potential dividend hike

The Dicker Data Ltd (ASX: DDR) share price is marginally higher at $7.48 today and up nearly 150 per cent over just the past year as it continues to grow profits at strong rates.

As a leading IT hardware distributor to businesses all over Australia it needs a lot of warehouse space for storage and is building a new 29,000 sqm operating facility in Sydney’s Kurnell at a cost around $55 million. Its due for completion within a couple of years. 

In order to facilitate the move it recently sold and leased back its existing Kurnell facility for $36 million and made a $12 million profit on the deal.

As a result the company believes it’s in a financially strong enough position to pay out the $12 million profit to shareholders in the form of a 5 cents per share special dividend.

The company’s founder and major shareholder David Dicker has long had a policy of paying out all profits in dividends to shareholders. 

It reports on a calendar year basis and will have paid out 22 cents per share to shareholders by the time of the October 4 special dividend payment with at least another 5 cents per share to be paid in December 2019 as part of its quarterly dividend program.

For the six months to June 30 2019 it grew profit before tax 51% to $32.3 million and is tracking well ahead of its forecast for full year profit before tax of $51.4 million. 

Therefore it’s possible the final interim dividend due in December will be ahead of the expected 5 cents per share.

It’s also possible the group will upgrade its calendar 2019 profit guidance after the September quarter given how far it tracked ahead of forecasts over the first half.

Over the longer term the investment in a new operating centre suggests management sees room for growth.

Given the COO has recently been snapping up more shares, while the founder and his partner are not selling any shares the insider activity suggests confidence in the future. 

Share market investing is fraught with risk so if you can find a founder-led business with a long track record of growth and heavy insider ownership that reduces a lot of the risk around alignment. 

Another well aligned dividend pick to report today is Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). The investment conglomerate has now lifted its interim and final dividend every time since the year 2000 and right through the GFC.

You cannot argue with that and it’s a defensive business that could be worth a look for dividend seekers. 

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

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Washington H. Soul Pattinson and Company 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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