I think boosting my exposure to e-commerce with UK stocks is a must-do for this new decade. It’s true that a stuttering economic recovery could damage broader consumer confidence in 2021 and possibly beyond. But for the time being, all the signs point to further good growth in internet shopping volumes.
Bank of England officials for example suggest that overall spending levels will rise when Covid-19 lockdowns end. Bank governor Andrew Bailey says that “after you lock people up for this long they go for it.” Britons have saved an extra £125bn since the pandemic began, Threadneedle Street estimates. And Bailey reckons consumers could end up spending more than the 5% of those savings that the BoE currently estimates.
A UK share for the e-commerce boom
This bodes well for supply chain specialists like Wincanton (LSE: WIN). This UK share offers warehouse and transport services that allow retailers and product manufacturers to reach their customers. And it operates across a broad variety of sectors, from the defensive grocery and energy segments to the more cyclical home furnishings, DIY and construction arenas.
Latest financials showed how the home shopping boom is lighting a fire under Wincanton’s top line. Revenues at its Digital and eFulfilment unit soared 40% in the final quarter of 2020, it said in January. As a consequence, turnover at group level rose a healthy 10% year on year.
Automation in the supply chain is also becoming more and more important as businesses try to improve efficiency and improve the customer experience. It’s a field in which Wincanton is also an expert following heavy investment in recent years. The company’s Winsight in-cab technology, for instance, allows real-time tracking of deliveries. Meanwhile its ProGlove hand scanner improves scan times and helps reduce the rate of errors.
Dividends tipped to soar
All this explains why City analysts expect Wincanton’s earnings to go from strength to strength over the next few years. Current estimates suggest the UK stock’s earnings will fall 16% this fiscal year (to March 2021). They do, however, also reckon that annual earnings will balloon 9% and 20% in financial 2022 and 2023 respectively.
As a consequence the number crunchers anticipate ripping dividend growth over the next few years too. An estimated full-year payout of 8.3p per share for this fiscal period moves to 10.2p for next year and to 12.1p for the following year. As a consequence this year’s yield of around 3% eventually improves to 4.5% for the end of this full year period.
Sure, investors can get bigger yields from other UK shares today. And shareholder returns could take a hit in the near term if consumer confidence wavers. Sales could suffer from retailers and manufacturers, which would then damage demand for Wincanton’s services, hitting profits and potentially pulling its share price lower.
But for those like me looking for strong and sustained dividend growth over the long term I think Wincanton is worthy of close attention today as the e-commerce market continues to grow.
