Up 1,630% in 10 years and with a 4.2% yield, here’s my favourite passive income investment

Oliver thinks Games Workshop is an exceptional company offering generous dividends for passive income. But it can’t grow forever!

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Image source: Games Workshop plc

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I prefer to invest in companies that I think are of high quality and durable and hold them for a long time. With these types of investments, there might be periods of growth and periods of price contraction. However, the point is to stress operational and competitive quality. If I capture quality, growth usually comes. It’s a lot less work than having to monitor price charts and trying to decipher market psychology.

Games Workshop oozes quality

One of my favourite investments I own is Games Workshop (LSE:GAW). What’s great is that it also has a generous dividend yield at the moment of 4.2%, and it’s been common for it to be higher than this over the past 10 years.

When I’m looking at investing for dividends, the price of the shares is still crucially important. What I don’t like is when I find high dividend yields but a share price that’s tanking. Those kinds of investments aren’t for me.

The good news is Games Workshop shares have grown a whopping 1,630% in price over the last 10 years. That’s remarkable growth, and it just goes to show how finding quality companies can pay off.

Some of the company’s customers have been buying its products for over 30 years. The business is renowned as the leading fantasy tabletop game developer and ecosystem in the world. That’s what I think about when I invest in Games Workshop, not the stock price.

Will the investment stay attractive?

I don’t think I’ve got anything to worry about in the next few years with my investment in this business. I’ve read much of management’s press releases, and they’ve advised shareholders not to expect linear growth. However, I don’t mind that. As I said, I aim to hold companies for decades when possible, and some bumps on a generally uphill climb are tolerable to me.

Leading analysts are also expecting its earnings growth to continue with strength over the next three years. Also, as the shares are down around 18.5% from all-time highs, I think they’re potentially slightly undervalued right now. All in all, what’s not to love?

I don’t love the risks

Games Workshop isn’t exactly a new company — it was founded in 1975 and had its initial public offering in 1994. I don’t expect any company to grow forever and I know the firm won’t deliver the same results as in the past unless it expands aggressively overseas.

The thing is, I have a feeling that its games are highly tailored to fit a Western audience much more than an Eastern audience. For example, markets like China and India have diverse tastes to in the UK, US, and Europe. Therefore, its growth strategies in these areas might not be as fruitful as investors would like. It’s still early days for the company in Eastern markets, so I’ll have to keep monitoring this.

A top holding

Games Workshop is one of the investments I own in my very selective and concentrated portfolio. I wouldn’t own it if I didn’t think it was of the utmost quality. I plan to own it indefinitely until its position in the market starts to weaken in the long term. That seems unlikely to me any time soon.

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 assessed. Consider taking independent financial advice.

Oliver Rodzianko has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Games Workshop Group Plc. 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.

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