This ASX dividend star plans to grow its dividend by 31% in FY 2020 despite COVID-19

The Dicker Data Ltd (ASX:DDR) share price jumped 10% on Wednesday after revealing strong growth despite COVID-19…

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The Dicker Data Ltd (ASX: DDR) share price was a strong performer on Wednesday after revealing that its sales have continued to be very strong despite the coronavirus pandemic.

The shares of the distributor of information technology products jumped 10% this afternoon before ending the day with a 6.5% gain to $$6.86.

How has Dicker Data been performing?

According to the release, during the three months ended March 31, Dicker Data's total revenue increased 19.9% on the prior corresponding period to $463.9 million.

Things were even better on the bottom line, with its first quarter net profit before tax increasing 36.3% to $18.4 million. Management notes that this was the result of sales operating cost leverage being achieved.

What were the drivers of this growth?

Dicker Data has been benefiting from the work from home initiative during the coronavirus pandemic. So much so, the month of March resulted in its highest ever revenue month.

The company notes that with many organisations enabling their workforces to work remotely, it has seen a surge in demand for remote working solutions across both its hardware and software portfolios. It feels this highlights IT distribution's role as an essential component for business continuity.

And while there were some supply constraints at the start of the quarter, it was able to navigate this successfully. Pleasingly, with factories becoming fully operational, supply constraints are easing and management expects to be able to complete the balance of backorders in the coming weeks.

Dividend update.

The good news for income investors is that Dicker Data intends to continue with its dividend policy of paying out 100% of after-tax profits to shareholders in quarterly dividends.

At this stage, Dicker Data intends to pay a fully franked full year dividend of 35.5 cents per share in FY 2020. This will comprise three interim 7.5 cents per share dividends and one 13 cents per share final dividends. Based on today's close price, this equates to a fully franked 5.2% yield.

This represents a 31.5% increase on FY 2019's 27 cents per share dividend, which also included a special 5 cents per share dividend. 

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. 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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