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Greggs (LSE:GRG) shares are down 37% for the reason that begin of the yr. However decrease share costs can usually imply higher returns for buyers 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 yr 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 at present’s costs, nevertheless, the equation seems 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 yr in the past. However the share price at present is 36% decrease than it was a yr in the past, which greater than offsets the anticipated fall within the dividend.
Consequently, a £10,000 funding in Greggs at present would purchase 556 shares – sufficient to generate £384 in passive earnings. And the forecast is best for 2026.
| 12 months | Dividend per share | Development % | Yield (£17.91 share price) |
|---|---|---|---|
| 2024 | 69p | – | 3.85% |
| 2025 | 68p | -1.44% | 3.80% |
| 2026 | 70.7p | 3.97% | 3.95% |
Analysts expect the challenges of this yr 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 primarily based on at present’s costs (sufficient to make a £10,000 funding generate £393 in passive earnings). That’s not dangerous, however how doubtless is it?
Outlook
I feel buyers have good cause to count on development over the following couple of years. I assumed the latest earnings report was fairly dangerous, however I don’t see this as an issue within the brief time period.
The problem Greggs has been dealing with just lately 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 down to troublesome buying and selling situations, it suggests Greggs may not be as resilient in a weak financial system as some buyers would possibly hope.
Nonetheless, within the brief time period, I feel buyers have cause to be optimistic. Whereas like-for-like gross sales could be 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 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 feel 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 run.
Ultimately, Greggs will attain its remaining capability when it comes to shops. From then, development must come from greater 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 price is affordable 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.