I’d buy this top FTSE small-cap stock with its 4% yield!

It’s easy to get caught up in the hype and fanfare of FTSE blue-chip stocks, if you ask me. However, I genuinely believe that some small-caps offer excellent opportunities too.

One stock I’m a fan of is Shoe Zone (LSE: SHOE). Let me explain why.

Footwear for wallet-conscious consumer

Shoe Zone is a footwear retailer offering a range of shoes for all ages and functions. The business operates primarily through a 350-strong store network throughout the UK and Republic of Ireland. It also has an online offering.

So what’s happening with Shoe Zone shares? As I write, they’re trading for 222p. At this time last year, they were trading for 168p, which is a 32% rise over a 12-month period.

I’m hard pressed to find many FTSE small-cap stocks performing so well in the face of current economic challenges. As a reminder, these issues include soaring inflation and rising interest rates.

My investment case

Starting with the bull case, Shoe Zone shares are primed to benefit from the current economic outlook, in my view. A cost-of-living crisis here in the UK has prompted many consumers to turn away from premium or branded products and towards cost-efficient alternatives when it comes to footwear and other essentials. Shoe Zone’s offering sits exactly in this space and I’m a customer when looking for shoes for my young son.

Next, Shoe Zone’s most recent full-year trading update released a few weeks ago showed me how well the business is doing. Revenue increased by 6.1% compared to last year. Profit before tax is expected to rise nicely and the business looks to have a solid balance sheet with lots of cash on its books. This could be useful for growth plans as well as supporting it during times of volatility like now. Full results are due soon but on the surface of things, Shoe Zone is doing well.

As well as good performance, Shoe Zone shares would boost my passive income with a 4% dividend yield, as I write. This is higher than the FTSE 100 average yield of 3.9%. However, I’m conscious that dividends are never guaranteed.

Finally, Shoe Zone shares look decent value for money to me right now on a price-to-earnings ratio of just 11.

A FTSE small-cap stock I’d buy

Shoe Zone looks like a top small-cap stock to me. It has a good track record, as well as a solid market presence and profile with its offering. Plus, the shares look well priced and provide a passive income opportunity too.

I’ve decided that the next time I have some spare cash to invest, I’d buy some Shoe Zone shares for my holdings.

I’ll be honest and admit that I’m not expecting Shoe Zone shares alone to make me rich, but I do believe that they can definitely boost my wealth as part of a diversified portfolio of stocks.

The post I’d buy this top FTSE small-cap stock with its 4% yield! appeared first on The Motley Fool UK.

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Sumayya Mansoor 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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