A passive income stock I’ve bought to supercharge my wealth!

I think this UK dividend stock is one of the best to buy for healthy long-term passive income. Here’s why I plan to hold it for years to come.

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Investing in retail shares can be risky as the cost of living crisis worsens. According to the British Retail Consortium, retail sales slumped 0.3% in April. Sales have been cooling since the start of 2022 and last month’s result was the first fall for 15 months. Looking for passive income stocks to buy in retail is difficult right now.

However, history shows us that certain niche retailers can perform better than the broader sector. This is why I’m considering boosting my holdings in Games Workshop Group (LSE: GAW).

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Not only does this business operate in a fast-growing retail niche (fantasy wargaming), but it’s widely considered to be the market leader.

The gold standard

There are many types of tabletop gaming out there. But Games Workshop’s Warhammer 40,000 and Warhammer Age of Sigmar formats are the gold standard.

The business designs, manufactures, and sells these products though its own stores and website and via third parties. Its 40+ years of experience has enabled it to create the best miniatures and games, and a rich library of accompanying lore, to attract new players and keep existing hobbyists hooked.

I also like Games Workshop thanks to its drive into new global territories. This lessens its reliance on the UK economy to drive sales. And it should (in my opinion) open the door to solid long-term profits growth. Indeed, Games Workshop reported another record sales performance in the six months to November.

Growth hero

The wargaming goliath does face risks of counterfeiting as the 3D printing revolution takes off. This is a particular danger to Games Workshop because its products are more expensive than the market average.

But so far I’m encouraged by its resilience on this front. The company has a long record of annual earnings growth behind it, including a 70% earnings per share rise in the 12 months to May 2021 when Covid-19 lockdowns supercharged sales of hobby products.

A top passive income stock

The fanatical fan base that Games Workshop has created makes it a top stock for me when seeking a passive income too. This means that revenues continue rolling in during the bad times as well as the good, giving the company the financial strength to regularly pay decent dividends.

On top of this, the high prices charged for its products means excellent margins (gross margins came in at 70% between June and November). This in turn supercharges the amount of cash the firm generates and thus its ability to make big payments to its shareholders.

The average FTSE 250 dividend yield sits at around 2.5%. But Games Workshop’s yield beats this comfortably (at 3.4% and 3.5% for FY23 and FY24, respectively). This is one of my favourite passive income stocks and I plan to continue building my stake in it.

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Royston Wild has positions in Games Workshop. The Motley Fool UK has recommended Games Workshop. 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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