While dividend stocks can be quite boring, when left to run for the long term, they can unlock some pretty enormous returns. So much so that with the right income stocks, even a modest income portfolio can eventually expand and reach seven-figure territory.
Here’s how.
The power of dividends
As a predominantly growth-focused investor, my Self-Invested Personal Pension (SIPP) income portfolio is relatively modest at around £18,000 compared to my six-figure growth-focused Stocks and Shares ISA. But the passive income it generates, even with minimal contributions in recent years, has begun accelerating drastically.
In 2025, my portfolio of dividend stocks generated £513.86 in income. But looking at the latest analyst forecasts, this payout is on track to grow to just over £600 by the end of 2026, even without adding any additional capital.
That’s significantly ahead of the £369.87 I earned in 2023 when my income portfolio debuted. And it translates into a 17.5% annualised dividend growth rate.
Assuming this level of payout expansion is maintained over the long run and that I continue to automatically reinvest all the dividends I’m receiving, last year’s £513.86 could transform into over £1m in roughly 44 years.
But if I also drip feed an extra £513.86 each month into my SIPP (£642.33 after 20% tax relief), that journey’s slashed to just under 19 years – a perfect set up for early retirement!
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.
A top dividend growth stock to consider
A double-digit dividend growth rate’s possible when investing exclusively in highly cash-generative businesses with the flexibility to keep rewarding shareholders.
A perfect example of this from my income portfolio is Games Workshop (LSE:GAW).
When I first bought shares, my initial yield was pretty modest at around 3.2%. But over the last three years, with revenues, earnings, and cash flows continually hitting new record highs, management’s comfortably more than doubled its shareholder payouts. And in turn, my initial yield has since expanded to over 7%.
Yet despite this rapid growth, I still see plenty more long-term dividend expansion potential on the horizon.
Bull versus bear
The business remains an unrivalled monopoly with extraordinary economics within the tabletop miniature gaming market.
While certainly niche, the cult-like customer culture has translated into phenomenal pricing power and enviable average customer lifetime value as hobbyists keep coming back for more. And with a highly anticipated Amazon TV series in the works, the global Warhammer fanbase appears well-positioned to expand even more aggressively over the coming years.
However, the exceptional financials and impressive growth trajectory of the business haven’t gone unnoticed. And Games Workshop shares trade at a pretty lofty premium as analyst expectations ramp up.
Premium valuations, even well-earned ones, open the door to volatility. And in 2026, there are some potential temporary headwinds that could weigh down on currently lofty sentiment.
Weaker consumer spending across both the UK and US markets is already causing core revenue growth to slow. And management has also warned of an incoming sharp drop-off in its licensing royalties this year, which may put an end to the firm’s multi-year streak of hitting record sales and profits.
Nevertheless, when looking to the long run, Games Workshop’s barely scratched the surface of its potential market opportunity, in my opinion. That’s why, if the shares do suddenly take a tumble, I’ll be ready to start buying more.
