2 UK growth stocks I’d stash in an ISA for the long haul

Growth stocks that also pay dividends can be great investments. But investors should be aware of the tax implications if things go well. 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A Stocks and Shares ISA can be a great asset for growth investors. But working out what to invest in is also crucial to building wealth over the long term.

I think Rightmove (LSE:RMV) and Games Workshop (LSE:GAW) look like great stocks to consider for an ISA. Both have something important in common that makes them stand out to me.

Tax advantages

Investments held in a Stocks and Shares ISA are exempt from taxes on dividends and capital gains. And that can be a big advantage for overall returns.

Should you invest £1,000 in Barratt Developments right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barratt Developments made the list?

See the 6 stocks

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

With dividends, if I can’t keep all of the income a company distributes to me, I can’t reinvest it. And that can reduce the rate at which my investment compounds over time.

In the case of capital gains, the point of earning a big return on an investment is limited if I have to pay it back in taxes when I come to realise it. That’s why an ISA is important.

Equally though, avoiding taxes on returns is valuable only if an investment generates some meaningful returns in the first place. And the key to this is working out what to invest in.

Rightmove

Rightmove has grown its earnings per share by an average of 9% per year over the last decade. And the stock is up 209% as a result.

Created with Highcharts 11.4.3Rightmove Plc PriceZoom1M3M6MYTD1Y5Y10YALL27 Sep 201927 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

Running the UK’s largest property platform doesn’t take much in the way of physical assets. As a result, the company has managed to distribute 79% of its net income as dividends.

I think the business has a decent chance to keep growing its earnings going forward. And that should lead to higher dividends as well as share price gains.

Rightmove’s competitive position is currently under threat from a powerful rival and that’s a risk investors should be aware of. But disrupting the market leader won’t be easy. 

While barriers to entry might be low, achieving the kind of scale Rightmove has is likely to be extremely difficult. And that makes me think the stock could be a good investment.

Games Workshop

Over the last 10 years, Games Workshop’s earnings per share have gone from 39p to £4.58. That’s some staggering growth and the result has been a stock that’s up 1,700%. 

Created with Highcharts 11.4.3Games Workshop Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL27 Sep 201927 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The company’s biggest asset is Warhammer. And this has had a durable appeal with its followers, which has been extremely valuable for investors. 

Like Rightmove, Games Workshop’s business is relatively light on physical assets. That’s why it has been able to grow while paying out most of its net income to investors.

The big question is how far this can continue. Expanding into new geographies has been a key part of the company’s previous growth and this can’t go on forever. Plus it could be vulnerable to new competitors in its market.

Nonetheless, I think Games Workshop has an extremely strong competitive position and attractive unit economics. And that’s why I’ve been buying it for my ISA.

ISA investments

When companies grow while distributing lots of income to shareholders, investors need to be mindful of taxes. And a Stocks and Shares ISA is a great asset here.

I’ve hit my ISA contribution limit for this financial year. But Games Workshop and Rightmove are stocks I’d love to either own or add to in my portfolio for the long term.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Stephen Wright has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Games Workshop Group Plc and Rightmove 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.

More on Investing Articles

Investing Articles

Here’s the dividend forecast for Rolls-Royce shares as Trump rocks the markets

Rolls-Royce shares have joined in the volatility over the past week. However, with the direction being largely downwards, the dividend…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Dividend yields of up to 11%! Here are 3 UK passive income stocks to consider

Searching for ways to supercharge your passive income with UK dividend stocks? Here are three that have grabbed our writer's…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

£10,000 invested in NatWest shares at the start of 2025 is now worth…

NatWest shares surged into 2025, but things have become a little more complicated in recent weeks. Dr James Fox explores.

Read more »

Investing For Beginners

Why the FTSE 250 could outperform the FTSE 100 for the rest of the year

Jon Smith explains why the FTSE 250 could do better than its big brother when factoring in domestic exposure and…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Tariff fears send the Lloyds share price tumbling, but the dividend yield is climbing

Just when the Lloyds Banking Group share price had been rising steadily, along comes a global upheaval to knock it…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how a stock market crash could help an investor retire years early

A stock market crash can be alarming -- but for the well-prepared investor, it can also be an exceptional opportunity…

Read more »

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »