Growth stocks can sometimes transition into big dividend payers, with share prices potentially declining before this shift occurs. However, there are exceptions to this trend.
One such stock is Games Workshop (LSE: GAW), a company that has managed to maintain its elevated share price while also offering a substantial dividend to investors. Despite slowing growth rates, Games Workshop has the potential to enter a new phase of rapid expansion, making it an attractive option for dividend investors.
Typically, companies experiencing fast earnings growth do not prioritize dividends, as the focus is on capital appreciation through rising share prices. However, as businesses mature and growth rates slow, dividends can become more important.
Games Workshop has defied the norm by achieving significant share price growth over a four-year period, driven by strong earnings growth. Although the rate of earnings growth has slowed, the company has continued to increase its dividend payouts, offering investors a forward-looking yield of over 4%.
While there are risks associated with investing in Games Workshop, such as the potential for further declines in earnings growth, the company’s loyal customer base and recent partnership with Amazon for film and television rights within its fantasy universe provide opportunities for future growth.
Investors should conduct further research on Games Workshop and consider its potential for inclusion in a diversified portfolio of dividend stocks with a long-term focus. The company’s upcoming earnings release on June 30th will provide more insight into its performance.
Overall, Games Workshop presents a unique opportunity as a former growth stock that has transitioned into a dividend play with the potential for future benefits.