Why the Data#3 (ASX:DTL) share price is shooting 9% higher today

The Data#3 Limited (ASX:DTL) share price is shooting higher on Monday after releasing its guidance for the first half of FY 2021…

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The Data#3 Limited (ASX: DTL) share price has started the week in fine form.

At one stage today the business technology solutions company's shares were up as much as 9.5% to $5.76.

They have since dropped back a touch but are still up 5% to $5.52 at the time of writing.

This latest gain means the Data#3 share price is now up a sizeable 37% since this time last year.

Why is the Data#3 share price storming higher today?

Investors have been buying the company's shares on Monday following the release of an update on its guidance for the first half of FY 2021.

When the company held its annual general meeting in November, it advised that it was expecting a largely flat half year result.

Management explained: "We have navigated our way through the extreme market volatility and made a solid start to FY21. [..] At this stage we do not envisage the first half result to be materially different to our substantial first half FY20 performance."

However, it appears as though December was a much stronger month than anticipated.

This morning the company advised that it now expects to deliver a profit result ahead of the same period last year.

According to the release, it expects to report a first half profit before tax in the region of $13.7 million. This will be an 8% increase on the record half year profit it achieved in the prior corresponding period of $12.7 million.

What about its dividend?

Management advised that it plans to announce its audited results and interim dividend on 18 February 2021 and that the Data#3 board intends to maintain the usual dividend practice.

Last year this meant a 90% payout ratio. Which, if it maintains this and increases its dividend in line with its profits, will mean a full franked 5.5 cents per share interim dividend.

Combined with its final dividend of 8.8 cents per share from FY 2020, this will mean a twelve-month trailing dividend of 14.3 cents per share. Based on the current Data#3 share price, this equates to a fully franked 2.6% dividend yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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