The UK and Ireland's leading provider of supply chain solutions, Wincanton(LSE: WIN), will update the market with its latest set of half-year results on Thursday (8 November), and I thought this would be a great chance for investors to consider staking a claim in this fast-growing logistics business ahead of the crowd on results day.
Largest British logistics firm
You'll often find analysts and commentators recommending shares that offer good levels of income in the form of dividends, or are significantly undervalued relative to their long-term prospects. Yet it's less often that you'll find quality stocks that serve up both at the same time, especially not in the small-cap arena. But guess what? I reckon Wincanton fits the bill perfectly.
The Wiltshire-based group may be the largest British logistics firm, but at just over £300m it still doesn't command a market capitalisation large enough to be considered as even a medium-sized listed company. A small-cap it may be, but Wincanton can in no way be considered a small-fry business, providing supply chain consultancy and solutions to some of the world's most admired brands, operating from 200+ locations, with 3,600 vehicles and 6.6m sq ft of warehousing right across the British Isles.
This 90-year-old business started out delivering just milk and dairy products, but has since expanded to provide supply chain solutions across a wide range of sectors including retail, construction, defence and energy. The company designs and implements services that range from setting up and operating distribution networks through to bonded warehouses, technology hosting, container transport and storage.
Wincanton has delivered double-digit earnings growth in each of the last four years, and reinstated its dividends in 2016, which at current levels provide a rock-solid yield of 4%. But it's the valuation that I'm baffled about. The company's shares trade on a bargain-basement earnings multiple of just nine, which leads me to believe that investors currently have a great opportunity to buy in to future growth with a lower level of risk than many of its small-cap peers.
Unaffected by Brexit
But wait. Wincanton isn't the only cheap high-yield stock I'm considering today. FTSE 250 building and civil engineering contractor Kier(LSE: KIE) is offering an even higher yield. With its share price drifting a third lower since March, the Bedfordshire-based group is serving up a tasty dividend that yields no less than 6.7%.
But as always, we need to be sceptical about such high yields and ensure the company in question is in good shape and able to afford its generous shareholder treats. With that in mind we can look back to September's full-year results, which gave shareholders lots to cheer about, as the group reported an 8% uplift in pre-tax profits to £126m, helped along by a 5% rise in revenues to £4.27bn.
With a growing order book of approximately £9.5bn and solid long-term fundamentals, I think it's safe to say the business has been relatively unaffected by Brexit, which just leaves me say the shares are trading far too cheaply on a price-to-earnings multiple of just nine for FY2018.
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Bilaal Mohamed has no position in any 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.