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When I invest my SIPP, I always look for stocks that I can just buy and forget about. That’s because the strategy I use in my retirement focuses on long-term dividend growth opportunities. And if used correctly, a small yield today can grow into something much bigger when retirement hits, providing a steady stream of income.
Fortunately for UK investors, the London Stock Exchange has a good range of dividend growth stocks to choose from. Some of the most famous are known as Dividend Aristocrats, blessed with more than 20 years of consecutive dividend increases under their belt.
Unfortunately, these incomes are well known. And since they were expected to keep going with shareholder payouts, these stocks often end up trading at a higher price. So instead, I’m more interested in finding future elites that trade at reasonable prices and attractive initial yields. That’s what you brought Games Workshop (LSE:GAW) in my SIPP two years ago.
Slow but growing benefits
Games Workshop’s share history over the past 10 years has not been a continuous upward trend. There have been a few dividend cuts along the way, and some years where dividends didn’t grow at all. But if you zoom out, the direction of shareholder payouts is pretty clear – they’re going up.
| A year | Dividends per share | Dividend Growth |
| 2015 | 52 p | – |
| 2016 | 40p | -23.1% |
| 2017 | 80 p | +100% |
| 2018 | 120 p | +50% |
| 2019 | 155p | + 29.2% |
| 2020 | 145p | -6.5% |
| 2021 | 235p | + 62.1% |
| 2022 | 235p | – |
| 2023 | 415p | + 76.6% |
| 2024 | 420p | +1.2% |
Over the past 10 years, the maker of small tabletop appliances has increased dividends by 700%. That’s an average annual growth of 23.2%. And although I have only been a shareholder since 2022, I am now earning a yield of 5.4% compared to the 3.4% currently offered in the market. That’s more than the 50% share price return I’ve enjoyed so far. But what is behind this growth?
The need for WarhammerIt’s going up
Since its inception in the 1980s, WarhammerIt has grown into one of the most popular collections of tabletop wargames in the world. And in recent years, interest in the hobby has grown as the company rapidly expands its reach. Licensing deals for video games and TV shows, combined with new international resale partnerships, have greatly increased public exposure. Warhammer the whole area at a small cost on many channels.
The effect of this strategy is quite clear. Looking at its latest results for the 2024 financial year ending in June, revenue hit an all-time high of £525.7m, with operating profits topping the £200m mark. And since these results were released, another one-sentence trading update followed, stating that trading is underway “in line with the expectations of the Board”.
Obviously, no business is a perpetual growth machine. But with a cult-like following from customers that brings significant pricing power, Games Workshop’s ability to continue to grow earnings and profits looks strong. At least, that’s what I think.
It’s not a risk-free investment, of course. The rise of home 3D printing invites a challenge that could reduce the company’s pricing power. After all, illegal miniatures are very cheap. However, so far, this threat, while growing, has not seemed to slow things down for this business. That’s why I plan to pool money when I have more money.
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