2 hidden dividend growth stocks that could help you retire an ISA millionaire

One of the most reliable ways to build stock market wealth is to focus on companies that are very consistent.

This may sound dull, but consistent, steady growth can generate surprisingly large profits for patient investors. And it's much easier to make money this way than trying to time your investments in volatile, high-risk stocks.

Today I'm looking at two firms that have been very consistent in recent years.

A strong pipeline

Property and construction firm Henry Boot (LSE: BOOT) has been in business for 132 years, and is still chaired by a member of the Boot family.

The group's sales rose by 33% to £408.5m, while pre-tax profit climbed 40% to £55.4m, according to full-year accounts published today. 2017 earnings of 32.1p per share mean that profits have now risen by 280% since 2013.

The group's management upgraded 2017 profit guidance in October and again in January, as several projects were completed more quickly than expected. This strong momentum is expected to continue in 2018.

Chairman Jamie Boot said today that although the firm "is mindful of the cyclical nature of our marketplace," current expectations are that economic conditions "will be similar to 2017 for the next two years."

Mr Boot said that the firm has a "strong pipeline" for 2018 and that customer sentiment remains "positive".

A dividend-growth buy?

The group's long history suggests to me that its management has a prudent approach to managing market cycles and controlling risk. Today's results seem to confirm this view. Net debt fell from £32.9m to £29m last year, giving a gearing level of just 11%.

The shares trade today on a 2018 forecast P/E of 11, with a prospective yield of 2.8%. That seems reasonably attractive to me, although it's worth noting that at 300p, the stock trades at a 50% premium to its book value of 203p per share. As a result, I'd rate this as a dividend-growth buy, but not a value investment.

Up 25% in one year

One company I rate highly as a potential alternative to Henry Boot is construction and infrastructure services group Morgan Sindall Group (LSE: MGNS).

Like Boot, this £558m firm has repeatedly outperformed market expectations over the last year. Broker consensus forecasts for Morgan's 2018 earnings have risen by 30% to 131p over the last year.

The group's shares have doubled over the last five years, but strong profit growth means they still look reasonably affordable, on 9.5 times forecast earnings and with a prospective yield of 3.9%.

A class act

One reason for this cheap rating is that the market is wary of the risk that the construction cycle could slow. A reduction in activity levels could cause profits to fall rapidly. But like Boot, Morgan Sindall has a strong balance sheet and a confident outlook.

The group's order book rose by 6% to £3.8bn last year, with particular growth in partnership housing and property services. Both of these divisions operate mainly in the social housing and the rented sector, where demand for property is strong at the moment.

I believe Morgan's diverse mix of business and its strong focus on cash generation make it one of the very best operators in this sector. The shares have fallen by around 15% since November. I think this could be a good buying opportunity.

Capital Gains

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Roland Head 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.

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