Dicker Data Limited Case Study

Dicker Data Limited (DDR) was established by current controlling shareholders David Dicker and Fiona Brown (formerly Fiona Dicker) in 1978, as an importer and distributor of microcomputers. DDR is an Australian wholesale distributor of computer hardware, software, and related products.In 1987, DDR commenced distribution of Toshiba notebooks, becoming the first Toshiba distributor for notebooks in Australia. In 1993, DDR was appointed as a Compaq distributor in Australia, and Compaq was subsequently purchased by HP. In the past, DDR has been the distributor of various prominent brands including, but not limited to, Brother, Epson, Lenovo, Panasonic, and Kyocera. DDR was listed on the ASX on 24 January 2011, and operates in Australia and New Zealand.

Since 2000, DDR distributes products for over 90 prominent-brand vendors and supplying more than 3,000 resellers across Australia. It distributes a wide portfolio of products from the technology vendors including APC, Arcserve, AudioCodes, ASUS, Belkin, CISCO, Citrix, Dell Technologies, FUJIFILM, Gigaset, Hewlett Packard Enterprise, HP, Kensington, Lenovo, Microsoft, Motion, NETGEAR, Novell, ShoreTel, TDK, Trustwave, WatchGuard, among other Tier 1 global brands.

On 28th March 2023, Dicker Data Limited had 180.1 million shares listed on the ASX trading at a price of $8.30 with a Market Capitalisation of $1,495 million. The company recently announced revenue growth of 25%, recurring software revenue growing 42.5% to $743.9 million, and gross profit margin abating to 9.1% due to lower-than-expected margins in New Zealand. Operating costs, excluding one-off costs, increased by 32.4% and increased as a proportion of revenue to 5%, up from 4.7%, with the Company yet to fully synergize operating costs brought on by both the Exceed and Hills acquisitions. Operating profit before tax increased by 0.9%, excluding one-off integration and restructure costs of $2.1 million. Gross profit margins for Australia increased to 9.7% compared to FY2021 with the early signs of supply normalization and diversification of product mix.

INSTRUCTIONS:

Using the information on Dicker Data Limited collected from Morningstar Datanalysis contained in the additional document titled 'Dicker Data Limited data' in this assessment folder, answer the following questions demonstrating your relevant insights into each topic. In your response, please ensure you refer to the relating theory as well as the financial data of the case company. Question 4: Payout Policy

Dicker Data Limited pays a 100% fully franked quarterly dividend since 30^th June 2019.

1. Given the current shareholder structure do you think this is an issue? Please provide your explanation.
2. What might be the motivations for paying such a high quarterly dividend?
3. What are the most relevant theoretical explanations for Dicker Data Limited's observed payout policy?