The UK market is full of high-yield dividend shares that make nice choices for passive earnings. Many pay above the three.5% common yield. However progress can be essential when contemplating shares for an earnings portfolio.

Considered one of my favorite FTSE 250 shares is Greggs (LSE: GRG). The favored high-street bakery chain has delivered spectacular efficiency since 2014. Up 434% prior to now 10 years, it’s crushed the broader UK market.

However previous efficiency isn’t indicative of future outcomes. So how a lot would a £10k funding as we speak internet me sooner or later?

Let’s take a look.

A stable basis

There’s little doubt Greggs is a well-loved and established British model. It’s the go-to pie and sandwich store of many hungry staff when lunchtime hits. In accordance with Statista, it was the preferred eating model within the UK in Q1 2024, beating US rivals like Burger King and McDonald’s. 

What’s extra, it’s one of the crucial prolific. Since 2006, the variety of Greggs shops within the UK has nearly doubled. It now has practically 2,500 outlets on excessive streets and in stations and airports throughout the nation.

With a £3.25bn market cap and £1.8bn of income final 12 months, it’s honest to say the corporate has a good basis for future progress. Nonetheless, its half-year 2024 outcomes revealed a slowdown. At £55.1m, internet earnings decreased 8.6% from H1 2023 and earnings per share (EPS) decreased from 59p to 54p.

Valuation and forecasts

varied metrics, the share price is perhaps overvalued. It’s 43% above honest worth primarily based on future money move estimates and the price-to-book (P/B) ratio exhibits the shares are 6.5 instances the corporate’s guide worth. That’s not unusual amongst fashionable shares however may restrict progress within the quick time period. It might must submit more and more higher outcomes to usher in extra consumers at this degree.

Analysts anticipate income to extend by 22% over the following two years, with earnings rising by round 13%. The common 12-month price goal is simply over £33, a 4.3% improve from as we speak’s price.

Dividends

Dividend-wise, Greggs had a superb monitor report previous to Covid. Funds elevated between 2000 and 2018, with solely a quick pause in 2013. They had been decreased in 2019 and reduce for one 12 months in 2020. Nonetheless, they returned with a vengeance in 2021, nearly doubling the 2018 payout. 

Nonetheless, at 2%, the yield is low and received’t ship a lot added worth. It will pay solely £20 a 12 months on a £10,000 funding. Nonetheless, assuming a median 5% annual price progress and reinvested dividends, the pot may develop over time.

With these figures, it may double to £20,000 after 10 years and pay dividends of £370 a month. It’s not a lot, however greater than a typical financial savings account would obtain.

Closing ideas

I believe Greggs is a stable and dependable worth inventory however not an enormous passive earnings earner. My concern is that it might have tapped out its market within the UK. I believe it has potential for growth in Europe however could wrestle to discover a foothold within the US.

I like my Greggs shares and I’m an everyday buyer so I plan to carry them. However I’m not shopping for extra. I’m involved about the way it will develop going ahead.

I belief it has a plan.