For investors looking to earn a second income, dividend shares are impossible to ignore. But not every stock is the same.

Eye-catching dividend yields promise quick returns. In some cases, however, lower starting returns can make for strong long-term results.

Dividend investing

If you invest £20,000 at 7% and reinvest the returns each year, you reach £152,245 after 30 years. And that offers up £9,959 a year.

That’s assuming you do it using a Stocks and Shares ISA. Without as ISA’s tax advantages, the returns are going to be lower.

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.

That’s one way to increase dividends over time. Another is to have the company do it for you.

A lower yield and a growing dividend can also be very effective. Especially for investors who aren’t in a rush.

A 2% dividend yield might not seem like a lot. But for a company that can grow at a high rate over time, it can be worth paying attention to.

Growing dividends

Games Workshop (LSE:GAW) shares currently come with a 2.09% dividend yield. That’s enough to turn £20,000 into £418 a year. 

It’s not a huge return. But the firm has been increasing its shareholder payouts at an eye-catching pace.

Over the last five years, the dividend per share has increased from £1.80 to £5.60. That’s a 202.87% increase – or 24.74% a year.

That’s without shareholders reinvesting anything. And it’s a much higher compounding rate than 7% a year.

The big question for investors is how long Games Workshop can continue like this. I think it might be a surprisingly long time.

Growth prospects

Not many companies can grow at high rates for decades. But Games Workshop has been doing it for longer than most. 

The key to this is its strong Warhammer franchise. It means the firm can generate repeat business with regular updates.

That’s incredibly valuable. But the company does have to tread carefully – there are limits to how many new releases its customers will buy.

Hasbro has seen this recently with Magic: The Gathering. Focusing on short-term revenue growth can risk alienating customers.

This is a real risk for Games Workshop. But what can investors – like me – realistically hope for going forward?

What can investors expect?

I’m not expecting Games Workshop’s dividend to grow at 24% for 30 years. But I don’t expect it to slow down imminently.

Aided by an upcoming television series, the company is making progress in the US. That’s a huge potential market.

Here’s my rough expectation for the company’s growth going forward:

That’s not including reinvesting dividends. But as the firm’s growth rate decelerates, I expect the stock to trade with a higher yield.

This should provide a chance to boost the return further by reinvesting at higher rates. And that’s what I’m looking for with my investment.

The road to £12,508

The growth rates I’ve sketched potentially turn £20,000 into a £12,508 second income within 30 years. That’s with dividends reinvested at rising yields, which of course, isn’t guaranteed.

When it comes to the stock market, past success doesn’t mean future returns are a certainty. Investing would be a lot easier if it did.

Nonetheless, Games Workshop has some durable strengths. And with the stock almost 14% off its highs, I think it’s worth a look.

Should you invest £5,000 in Games Workshop Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Games Workshop Group Plc made the list?

Stephen Wright owns shares in Games Workshop.