When investing in my Self-Invested Personal Pension (SIPP), I’m always looking for stocks that I can just buy and forget about. That’s because the strategy I’m using for my pension is focused on long-term dividend growth opportunities. And if executed correctly, modest yields today can grow into something far more substantial by the time retirement comes knocking, providing a steady stream of passive income.
Luckily for UK investors, the London Stock Exchange has a pretty wide range of dividend growth stocks to pick from. Some of the most popular are known as Dividend Aristocrats, blessed with over 20 years of consecutive dividend hikes under their belt.
Unfortunately, these income investments are very well known. And with expectations that they’ll keep hiking shareholder payouts, these stocks often end up trading at a premium. So instead, I’m more interested in finding future aristocrats who trade at more reasonable prices and more attractive initial yields. That’s what brought Games Workshop (LSE:GAW) into my SIPP two years ago.
Lumpy but growing dividends
Games Workshop’s dividend history over the last 10 years hasn’t been a steady upward trend. There have been a few dividend cuts along the way, as well as some years when dividends didn’t grow at all. Yet when zooming out, the direction of shareholder payouts is perfectly clear – they’re going up.
| Year | Dividend per share | Dividend Growth |
| 2015 | 52p | – |
| 2016 | 40p | -23.1% |
| 2017 | 80p | +100% |
| 2018 | 120p | +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 last 10 years, the tabletop miniatures manufacturer has increased dividends by just over 700%. That’s an annualised average growth of 23.2%. And while I’ve only been a shareholder since 2022, I’m now earning a 5.4% yield versus the 3.4% currently being offered in the market. That’s on top of the 50% share price return I’ve enjoyed to date. But what’s been driving this growth?
Demand for Warhammer‘s surging
Since its inception in the 1980s, Warhammer‘s grown to be one of the most popular collections of tabletop wargames in the world. And in recent years, interest in the hobby has surged as the firm rapidly expands its reach. Licensing deals for video games and TV shows, paired with new international reselling partnerships, has drastically increased public exposure to the Warhammer universe at minimal cost across multiple channels.
The impact of this strategy’s perfectly clear. Looking at its latest results for its 2024 fiscal year ending in June, revenue reached a new all-time high of £525.7m, with operating profits breaking through the £200m threshold. And since these results were released, another single-sentence trading update has followed, stating trading continues to be “in line with the Board’s expectations”.
Obviously, no business is an infinite growth machine. But with a cult-like following from customers delivering tremendous pricing power, Games Workshop’s ability to continue growing earnings and dividends looks strong. At least, that’s what I think.
It’s not a risk-free investment, of course. The rise of at-home 3D printing invites a challenge that could undercut the firm’s pricing power. After all, unofficial miniatures are significantly cheaper. Yet, to date, this threat, while growing, hasn’t seemed to have slowed things down for this business. That’s why I’m planning on topping up once I have more capital.
