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This dividend-paying mid-cap just keeps on giving. Should I buy?

What impresses me most about Computacenter (LSE: CCC) is the consistency of its financial returns over the last few years. The IT infrastructure and services provider just keeps on giving, churning out growth in all the right numbers, year after year.

Since the end of 2012, revenue has moved 42% higher, earning per share is up 63%, operating cash flow has swollen by 40%, and the dividend has grown by 45%. If you’d kept faith with the company and held the shares for the past six years you’d be up 180% by now, with dividends on top. That’s pretty good going for a mid-cap and proves that you don’t have to dabble with smaller firms to get big returns from the stock market.

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More good news

There’s more good news in today’s half-year results report. Revenue rose just over 18% compared to the equivalent period last year and adjusted diluted earnings per share shot up almost 28%. The directors expressed their confidence in the ongoing outlook by pushing up the interim dividend by 17.6% — nice!

Revenue came in at more than £2bn for the first six months of the year, which is a milestone the firm has never achieved before. The directors pin down several factors to explain the buoyant market conditions the firm is seeing. For example, customer organisations need to increase network capacity and enhance cybersecurity. There’s also good business for Computacenter from companies undertaking workplace upgrades and moving IT operations to the cloud.

Chief executive Mike Norris said in the report that it’s impossible to predict how long the good market conditions will continue, but “most of these drivers have significant momentum.” Meanwhile, chairman Greg Lock told us that 2017 was a record year for both revenue and profit, and he anticipates that 2018 “will be even better.”

Weighted to the second half

The second half of the year could be even better than the first because there’s an element of seasonality to operations. Revenues tend to be higher in H2 because of “customer buying behaviour.”  That leads to a “more pronounced” effect on operating profit, which the firm reckons is exaggerated by Computacenter’s staff taking their holidays in the latter half of the year.

The directors are confident that trading is in line with their expectations. City analysts following the firm have pencilled in an earnings increase of around 18% for 2018, and expect an uplift of 6% in 2019. But I think there’s more to Computacenter than just the next couple of years’ earnings growth. The directors pledged in today’s report to “continue to focus on the long term,” which will involve investing in the business, innovating and enhancing customer service.

I reckon the firm’s plan to remain competitive and keep on increasing value for new and existing customers will keep it thriving, just as the directors hope. It would have been wrong to bet against Computacenter over the past few years and I think there’s a good chance that the next few years could be good for the firm too, which makes the stock worthy of further research now.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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