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Greggs (LSE:GRG) shares are down 37% because the begin of the 12 months. However decrease share costs can typically imply higher returns for traders over the long run.
Within the case of the FTSE 250 meals retailer, the dividend yield is 3.86%. Going ahead, nevertheless, analysts are cautious about how sustainable that return is.
Dividend yields
A 12 months in the past, £10,000 would have purchased 360 Greggs shares. And with the corporate distributing 69p per share in dividends, this equates to £248 in passive earnings.
At right now’s costs, nevertheless, the equation seems to be very totally different. Analysts expect the dividend to drop to 68p per share, which means a 360-share funding is ready to generate £244.
That’s not good for anybody who purchased the inventory a 12 months in the past. However the share worth right now is 36% decrease than it was a 12 months in the past, which greater than offsets the anticipated fall within the dividend.
Consequently, a £10,000 funding in Greggs right now would purchase 556 shares – sufficient to generate £384 in passive earnings. And the forecast is healthier for 2026.
| Yr | Dividend per share | Development % | Yield (£17.91 share worth) |
|---|---|---|---|
| 2024 | 69p | – | 3.85% |
| 2025 | 68p | -1.44% | 3.80% |
| 2026 | 70.7p | 3.97% | 3.95% |
Analysts expect the challenges of this 12 months to be short-term in nature. Consequently, the expectation is for the dividend to achieve 70.7p – above its 2024 ranges – in 2026.
That may suggest a 3.93% dividend yield based mostly on right now’s costs (sufficient to make a £10,000 funding generate £393 in passive earnings). That’s not dangerous, however how probably is it?
Outlook
I believe traders have good purpose to count on development over the following couple of years. I believed the latest earnings report was fairly dangerous, however I don’t see this as an issue within the quick time period.
The problem Greggs has been dealing with not too long ago has been weak like-for-like gross sales development. This has fallen from 13.7% in 2023, to five.5% in 2024, and now to 1.7% within the first 9 weeks of 2025.
That’s fairly the decline. And whereas a few of it may be put right down to troublesome buying and selling circumstances, it suggests Greggs may not be as resilient in a weak economic system as some traders would possibly hope.
Nonetheless, within the quick time period, I believe traders have purpose to be optimistic. Whereas like-for-like gross sales is perhaps weak, I count on this to be offset by the corporate opening extra shops.
This isn’t sustainable over the long run. Nevertheless it occurred in 2025 and I count on one thing related in 2026 as Greggs continues to make progress in direction of its goal of three,000 retailers.
Consequently, the forecast of 70.7p per share in 2026 seems to be believable. And a 3.85% dividend yield at a time when 10-year UK authorities bonds yield 4.75% implies expectations of development.
Lengthy-term investing
From an earnings perspective, I believe Greggs shares look good over the following couple of years. However with my very own investing, I intention to look previous this to the long term.
Finally, Greggs will attain its closing capability by way of shops. From then, development must come from larger like-for-like gross sales, so the weak point on this metric is a real concern.
In my opinion, the query is whether or not the share worth is reasonable sufficient to be funding regardless of this. I’m undecided, and there are different alternatives that stand out to me extra, so I’ll not be shopping for now.
