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Greggs (LSE:GRG) shares have been on fairly the rampage over the previous week — up round 29% in simply 5 days! That’s nice, however the next share value normally ends in a decrease dividend yield for passive revenue hunters.
So how has this sudden burst upwards to £20 per share impacted the attractiveness of the dividend?
Stable outcomes
The excellent news is that the ahead dividend yield remains to be first rate at 3.5%. So 500 shares would pay about £350 per 12 months in passive revenue, assuming forecasts are correct.
After all, shareholder payouts are by no means in the end assured, however in Greggs’ case I’m assured about dividend sustainability. Within the first half of 2026, pre-tax revenue jumped 19.7% to £76m on gross sales of £1.1bn (up 7.2%).
Plus, the bakery chain turned money circulate constructive once more as capital expenditure mellowed. CEO Roisin Currie confirmed that Greggs is “now returning to a part of sturdy free money technology as capital depth reduces“.
The explanation for that is that two new state-of-the-art services are set to turn into operational over the following 12 months. These will assist enlargement to three,500 outlets over the following seven years, up from 2,773 on the finish of June.
The interim dividend was maintained at 19p per share, however from subsequent 12 months onwards Greggs can have considerably extra free money optionality for dividends and probably share buybacks.
Including new channels
Regardless of the stable first half, administration didn’t increase full-year steering. Maybe that warning is justified, given the heatwaves we’ve been having. In any case, folks do eat much less in sweltering climate, so gross sales within the second half is perhaps a bit lighter.
That stated, Greggs has improved its choices on this entrance lately, with extra iced teas and coffees. And it’s providing extra fibre and protein-rich meals for folks on GLP-1 weight-loss medicine like Mounjaro.
Greggs can be having success with its Bake-at-Residence vary, which is promoting properly in each Tesco and Iceland. That is set to be expanded to additional merchandise in future, whereas a self-service ‘Greggs Specific’ format in petrol forecourts is being trialled.
We stay centered on opening outlets in additional catchments and introducing handy methods for purchasers to choose up Greggs favourites, whereas broadening and innovating our menu consistent with altering tastes and developments.
Roisin Currie.
Is it value digging into?
Most writers right here at The Twelfth Magpie have considered Greggs as undervalued this 12 months. And whereas it’s clearly not as low-cost as final week, a ahead earnings ratio of 15.8 isn’t too costly for a agency with a rock-solid model that’s nonetheless rising and nicking market share.
Admittedly, inflation and rising unemployment make issues tough within the close to time period. Customers are sadly feeling the pinch and we don’t know the way lengthy it will final. The Center East disaster provides additional value uncertainty for Greggs subsequent 12 months.
However weighing issues up, I feel the inventory’s value fascinated with, assuming an investor’s prepared to carry for the long term. The brand new manufacturing and distribution hubs in Derby and Kettering ought to enhance effectivity from 2028 onwards.
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Ben McPoland has no place in any of the businesses talked about.
