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Greggs (LSE:GRG) shares are down 37% for the reason that 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, nonetheless, 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 immediately’s costs, nonetheless, the equation appears to be like very totally different. Analysts predict the dividend to drop to 68p per share, that means a 360-share funding is about to generate £244.
That’s not good for anybody who purchased the inventory a 12 months in the past. However the share worth immediately 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 immediately 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 predict the challenges of this 12 months to be short-term in nature. Consequently, the expectation is for the dividend to succeed in 70.7p – above its 2024 ranges – in 2026.
That may suggest a 3.93% dividend yield based mostly on immediately’s costs (sufficient to make a £10,000 funding generate £393 in passive earnings). That’s not unhealthy, however how doubtless is it?
Outlook
I believe traders have good motive to anticipate progress over the following couple of years. I believed the newest earnings report was fairly unhealthy, 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 progress. 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 all the way down to tough buying and selling circumstances, it suggests Greggs won’t be as resilient in a weak financial system as some traders would possibly hope.
Nonetheless, within the quick time period, I believe traders have motive to be optimistic. Whereas like-for-like gross sales is likely to be weak, I anticipate 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 anticipate one thing comparable in 2026 as Greggs continues to make progress in the direction of its goal of three,000 shops.
Consequently, the forecast of 70.7p per share in 2026 appears to be like believable. And a 3.85% dividend yield at a time when 10-year UK authorities bonds yield 4.75% implies expectations of progress.
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 remaining capability when it comes to shops. From then, progress must come from larger like-for-like gross sales, so the weak point on this metric is a real concern.
For my part, 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.
