The Motley Fool

Have £2k to spend? 2 small-cap dividend growth stocks I think could help you retire early

In recent days I discussed 7%-yielding  888 Holdings and explained why it’s a much better investment decision than buying into Bitcoin, and particularly so for dividend-hungry individuals.

Scouring the markets for other income heroes left me with an abundance of other income shares I believe could make you a fortune in the years ahead. I’d like to share a couple of these with you today.

Profits pounding higher

Robert Walters (LSE: RWA) is a share I like very, very much. In order to generate anything like a fortune in the decades ahead, it’s a good idea to invest in companies with decent emerging market exposure because of the booming growth rates there. And this business has this quality in spades.

The recruitment specialist has made foreign expansion a critical component of its growth strategy and this has seen it open the path to stunning profits growth.

The fruits of this programme are pretty well evident, as Robert Walters’ latest quarterly update showed. Whilst conditions in its UK marketplace remained difficult, gross profits rising just 2% in the three months to December, thanks to the success of its foreign divisions, profits at group level rose 13% year-on-year.

In its Asia Pacific region, gross profits leapt a stunning 19%, while in Europe these bounded 22% higher. Collectively these regions now account for two-thirds of total profits, and ongoing expansion here — including recent entry into the developing Central European market of Czechia — should enable turnover to keep ripping higher.

A great dividend grower

It’s not a surprise that City analysts are expecting earnings at Robert Walters to keep surging for the foreseeable future. And this, allied with the company’s impressive cash generation, means that dividends look set to keep rattling northwards as well.Incidentally the company had net cash of £74.1m on the books as of December from £31.1m a year earlier.

In 2019 and 2020, payouts of 15.8p and 17.2p are estimated — up from the 14.3p shelled out for 2018 — and figures that yield an inflation-bashing 3.1% and 3.4% respectively.

An added bonus for share pickers is that Robert Walters is dirt-cheap as well, as reflected in its forward P/E ratio of just 10.4 times. Heck, if you’re looking for value then you should check out Forterra (LSE: FORT) today as well, and particularly on the back of more brilliant news on the trading front.

The 4.5% yielder

Before I get to that though, that valuation… at current prices, the brickmaker carries a prospective P/E ratio of 9.2 times. It also sports monster dividend yields of 4.7% for 2019 and 4.8% for 2020, the number crunchers expecting robust profits growth in this period to keep growing payouts here too.

Full-year commentary released last week gave fresh life to Forterra’s bright outlook. In it the business praised “the sustained strength of the new-build residential market” that delivered what it described as a “good” trading performance in the final quarter of 2018. If you ask me, conditions look set to remain favourable too, as Britain’s homes shortage underpins demand for its bricks, a phenomenon which the business is hoping to exploit by building a new factory in Leicestershire.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

Royston Wild 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.