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Forget a Cash ISA! I’d buy this growth and dividend stock to get rich and retire early

One of the biggest mistakes that savers regularly make is ploughing their money into low-paying Cash ISAs. Imagine scrimping and saving each month only to lock your loot up in a product that only yields around 1.5%. It’s hardly worth the bother when you consider that the returns you’re likely to generate won’t help you retire in luxury.

A much better way to use your cash, as we here at The Motley Fool regularly attest, is by grabbing a slice of the UK stock market. Long-term investors can expect to grab annual returns of up to 10% each year on the back of share price growth and dividend income, and there’s plenty of top companies to pick from.

Games Workshop Group (LSE: GAW) is one such share that’s in great shape to deliver big dividends now and in the future, as newsflow in recent days has again shown. Brexit-related tension may be weighing on a great number of retailers but for this business, a mix of its leadership in the niche fantasy gaming arena, allied with steady international expansion, is allowing earnings to keep chugging along nicely.

Another top update

This was evident in the FTSE 250 firm’s latest update on Friday, a statement that propelled the share price almost 20% higher on the day to new highs above £54. In the short update Games Workshop advised that sales and profits in the six months to 3 November were ahead of the corresponding 2018 period, with guidance for the half year illustrating the strength of trading in the new year.

According to the retailer, sales will clock in at no less than £140m for the first half versus £125.2m last time out. And as a consequence pre-tax profit of at least £55m is estimated compared with the £40.8m generated a year earlier.  

A model share

Games Workshop has proved to be a beauty for both growth and income seekers over the past half a decade. Since fiscal 2014 the annual dividend has exploded by 288%, driven by earnings almost quadrupling in that time.

With City analysts expecting the bottom line to keep blasting higher – and supported by its brilliant cash generation that left £29.4m of net cash on the books as of June – it’s no shock that they’re expecting more meaty payout growth over the medium term.

The number crunchers over at Edison, for example, expect the bottom line to swell an extra 14% in the current fiscal year (to May 2020) and this gives rise to a predicted dividend of 177p per share, up from 155p time. Moreover, helped by an estimated 6% profits rise in financial 2021 the full-year payouts are expected to advance to 187p.

These dividend projections yield 3.3% and 3.5% respectively, thrashing the returns that one can expect from a Cash ISA and help take the edge off Games Workshop’s high forward price-to-earnings ratio of 23.4 times.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.