The Dicker Data Ltd (ASX: DDR) share price dropped around 5% this week despite the IT hardware distributor delivering a big profit upgrade.
Dicker Data now expects calendar year 2019 profit before tax more than $60 million, compared to prior guidance around $52 million.
It looks on course to deliver around $63 million, which would mean it beating its original guidance by around 20%.
Unfortunately for investors the profit upgrade was no secret with it partially priced into the stock. Still assuming Dicker Data has a reasonable 2020 it should be able to hike dividends a fair bit.
Notably on October 24 its chief operating officer just picked up another 7,092 shares on market for $7.06 each at a total around $50,100. Ordinarily, I wouldn’t make much of this but given he already owns some 673,000 shares the decision to leverage his net worth to the business further is notable. Nobody buys shares because they expect them to go down. Or hopefully not.
If we assume it can pay out 26 cents per share in dividends over the next 12 months it offers a yield of 3.7% plus franking credits based on its last closing price. The company looks set to pay a big final FY 2019 dividend by March 2020.
The forward earnings per share ratio is probably in the region of 26. However, this could come down significantly depending on calendar 2020’s performance.
Either way I reckon Dicker Data could still produce strong total returns over 3 to 5 years.
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Motley Fool contributor Tom Richardson owns shares of Dicker Data Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data 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.