I like to hold a small-cap stock or two, or three, for their growth potential.
One I’m keen on right now is Henry Boot (LSE: BOOT), the UK-based land promotion, property investment, development, and construction company. It’s at least worth further attention because of that cracking name!
Joking aside, I reckon the firm’s prospects look interesting, so I want to dig a bit deeper. For the record, Henry Boot can be found in the FTSE Smallcap index, and with the share price near 230p, the market capitalisation is around £311m.
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Positive announcements
The stock started climbing in April after a decline that started in the late spring of 2022. So I’m hopeful that this character change in the shares is being driven by something substantial in the business.
Sure enough, there was some good news from the firm in an announcement on 16 April, and it looks like it kick-started the new uptrend.
The company announced the sale of 494 residential plots in Cambridge to Barratt Developments (now Barratt Redrow). The sale completed in July, delivering Henry Boot an internal rate of return of 15% per year. So that was the conclusion of a decent investment for the business.
Chief executive Tim Roberts said at the time the sale demonstrates the “continued demand” the firm has been seeing for its premium sites. It was “particularly encouraging” given the challenging market backdrop and lower transaction volumes, Roberts said.
It looks like the stock market re-evaluated the prospects for Henry Boot’s business in a positive way. So that might be why the share price has been moving higher.
Roberts reckons the disposal shows the company’s experience in securing planning permission for complex sites and “navigating them through an increasingly onerous planning system“. So that skill enables the company to sell the plots to housebuilders.
The example is a great insight into how the business makes its living. But it’s been followed by several positive announcements since, and an upbeat interim results report delivered on 17 September.
An encouraging outlook statement
One risk with the shares arises from Henry Boot’s business being sensitive to general economic conditions. It’s also affected by sentiment surrounding the wider property sector. So it’s one of those stocks that requires careful consideration and timing by potential shareholders.
Nevertheless, September’s outlook statement from the company is optimistic in tone. A strengthening economy and the prospect of easing interest rates will likely help the business. So it may be a good time to focus on the stock.
Meanwhile, multi-year growth in the dividend has been robust, and the forward-looking yield for 2025 is about 3.6%.
I think that’s an attractive level of shareholder income. So if I had spare cash to invest right now, I’d dig in with further research with a view to considering a few shares for November and beyond. If the economy and the housing market continues to improve, Henry Boot may be well placed.
