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I like to own one or two or three small-cap stocks for their growth potential.
One that interests me at the moment is henry boots (LSE: BOOT), the UK-based land development, property investment, development and construction company. At least it deserves more attention because of that cool name!
Jokes aside, I think the company's prospects look interesting, so I want to dig a little deeper. For the record, Henry Boot can be found at the FTSE small cap index, and with the share price close to 230p, the market capitalization is around £311m.
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The stock started rising in April after a decline that began in late spring 2022. So I'm hopeful that this change in character in the stock is driven by something substantial in the business.
Sure enough, there was good news from the company in an announcement on April 16 and it seems to have fueled the new bullish trend.
The company announced the sale of 494 residential sites in Cambridge to Barratt Developments (now Barratt Redrow). The sale was completed in July, giving Henry Boot an internal rate of return of 15% per year. That was the conclusion of a decent investment for the business.
CEO Tim Roberts said at the time that the sale demonstrates the “continuous demand” The firm has been looking at its premium sites. Was “particularly encouraging” given the challenging market environment and lower transaction volumes, Roberts said.
It appears the stock market has positively reassessed the prospects for Henry Boot's business. Maybe that's why the stock price has been rising.
Roberts believes the sale demonstrates the company's experience in obtaining construction permits for complex sites and “navigating them through an increasingly onerous planning system“. This ability allows the company to sell the plots to home builders.
The example is a great insight into how the company makes a living. But several positive announcements have since followed, and an optimistic interim earnings report was delivered on September 17.
An encouraging outlook statement
One risk with the stock arises that Henry Boot's business is sensitive to general economic conditions. It is also affected by the sentiment surrounding the real estate sector in general. Therefore, it is one of those stocks that requires careful consideration and timing by potential shareholders.
However, the company's September outlook statement strikes an optimistic tone. A strengthening economy and the prospect of lower interest rates will likely help the business. So it may be a good time to focus on stocks.
Meanwhile, multi-year dividend growth has been strong and the expected yield for 2025 is around 3.6%.
I think it's an attractive level of income for shareholders. So if I had extra money to invest right now, I would dig deeper with a view to considering some stocks for November and beyond. If the economy and housing market continue to improve, Henry Boot may be well placed.
