This Neil Woodford high-growth small-cap stock is just getting started

Trying to take on a company like BT requires plenty of skill, a grand vision and most importantly cash, but that does not seem to have put off small-cap CityFibre Infrastructure(LSE: CITY).

Backed by Neil Woodford, it is trying to take on BT by building its own fibre optic infrastructure in UK towns and cities. The company is facing a massive uphill struggle to get to where it wants to be, but it is making steady progress. Last year it signed a groundbreaking strategic partnership with global telecommunications firm Vodafone to roll out Fibre-to-the-Premises to at least 1m homes in 12 existing CityFibre towns and cities. As well as this deal, last year management inked two contracts with public bodies to expand and develop network infrastructure.

Pushing ahead

According to a trading update issued by the firm today, progress is already well under way in the partnership with Vodafone. Detailed planning and preparation work is in progress for all the 12 cities in the pilot programme with work in the first location, Milton Keynes, expected to start in the first quarter of this year.

Unfortunately, while the company is making progress, it will be some time before shareholders see any results. City analysts are expecting the group to remain lossmaking for the next few years as it invests in its network. Still, for long-term investors, the opportunity here could be enormous. For any telecoms business, building out the network is the hardest part, after this, capital spending should fall dramatically and recurring income from customers' subscriptions provides a healthy cash flow to reinvest back in the business or return to shareholders.

It might take several years before CityFibre is in the position where it can consider cash returns, but the longer it waits, the more dominant it will become in the market, which should ultimately lead to higher returns for investors. Put simply, barring any unforeseen setbacks, its growth appears to be only just getting started.

Market leader

Another company I'm positive on the outlook for, and believe could achieve steady returns for investors over the long term, is GYG plc(LSE: GYG).

Another favourite of Neil Woodford, this company provides services to superyacht owners around the world. The great thing about this business is its defensive nature. People who spend tens of millions of pounds buying their yachts are not going to cut corners on repairs and maintenance. They will turn to the provider with the best reputation, no matter what the cost. And GYG has an excellent reputation among clients. The firm recently signed a letter of intent to work on 'REV 182', the world's largest research and expedition vessel currently under construction.

As it builds on its reputation, City analysts are expecting the company's earnings per share to leap by 55% during 2018, leaving the stock trading at a forward P/E of 10.4. Moreover, analysts believe the shares will support a dividend yield of 4.8% for 2018. In fact, GYG's dividend potential is what attracted Woodford to it in the first place. Commenting on his decision to take a 17.2% stake in the business at the time of its IPO, Woodford said: "It is a cash generative business, which is expected to pay an attractive dividend and support a progressive dividend policy going forward."

That being said, as a relatively young public company, GYG does not have much of a dividend history to prove to investors that it is an income champion, unlike this company.

Over the past five years, this firm has already increased its dividend payout by more than 100%, and it looks as if there's further growth ahead. It could be a better buy than stocks profiled above.

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Rupert Hargreaves owns no share 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.

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