Iâd like to bring your attention to Games Workshop Group (LSE: GAW), a dividend hero whose share price was recently registering just below all-time highs.
The fantasy game and model retailer barged through the ÂŁ40 per share barrier in late September but had slipped, then stagnated, in the year to April 7. The Warhammer owner reminded the market just what itâs all about a week ago, though, with a scintillating trading update which has prompted its stock price to swell around 20% in just a week.
In it, the FTSE 250 business advised that trading has âcontinued wellâ following the release of half-year financials in January, with sales and profits in the period to April 7Â ahead year-on-year. It added that the the signing of new licensing agreements had also pushed royalties above those of the prior period.
What truly sent Games Workshopâs share price spiralling higher, though, was news itâll be paying a 35p per share dividend on the back of these strong results. Consequently, the total dividend for the 12 months to May is put at 155p per share, up from 126p in the previous fiscal year.
Dividends marching on
Games Workshop was recently trading just below autumnâs record highs, but can it keep going? I certainly believe so. While Brexit continues to cast a cloud over the wider UK high street, forecast-smashing retail sales data released yesterday has reduced some of the angst surrounding conditions in the companyâs core marketplace and has provided some support to its investment case.
What really gets me excited in the long-term, though, are the steps that this niche retailer is making to build its multi-channel proposition in foreign territories. This includes expanding its global store network — the opening of a new Warhammer store in Hong Kong last year marked the companyâs 500th shop — and boosting capacity at its Memphis warehouse to better serve its US customers.
In fact, Iâm confident enough to say that even if broader retail-related data begins to disappoint again in the weeks and months ahead, that this wonât prove catastrophic for Games Workshopâs share price — after all, less that a quarter of group turnover is generated from British shoppers.
A model stock
It wasnât a surprise to see City brokers upgrading their forecasts in the wake of last weekâs update, and broker Edison for one expects earnings to rise 5% in the upcoming fiscal year (to May 2020) and that this will drive the dividend to 162p per share.
This projection yields a chubby 4.2%, but given Games Workshopâs lack of debt, the oodles of cash that it throws out, and its commitment to returning surplus readies to its shareholders, I believe this projection itself to be upgraded as the new year progresses. Now the firmâs forward P/E ratio of 18.8 times might not make it cheap, but this should prove no barrier to its share price marching ever higher in the months to come, in my opinion.