Greggs (LSE:GRG) shares have historically been a good source of rising passive income. Back in 2009, the dividend per share was 16.6p. This year, the figure is forecast to be around 69p per share.
Based on this, and the current share price, 1,000 shares in the FTSE 250 baker could pay around £690 in dividends per year. These would cost roughly £16,600, which is within the annual Stocks and Shares ISA contribution limit, meaning the income would be tax-free.
But is a 4.2% prospective dividend yield, which is not guaranteed, enough to justify considering Greggs stock today? Here’s what I think.
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What’s cooking at Greggs?
Ingredients costs are rising fast, conditions are “tough” on UK high streets, and like-for-likes (LFL) sales are only edging higher despite a record number of shops operating.
Heavy snowfalls certainly haven’t helped. Yet, management said that Greggs was “well placed for the challenges ahead“.
Sounds like a recent trading update, doesn’t it? In fact, that was from Greggs’ 2010 annual report. Wheat costs were through the roof after wildfires in Russia destroyed crops, while disposable incomes were under pressure and LFL growth was just 0.2%.
Yet since the start of 2010, the Greggs share price is up around 300%, with solid dividend growth on top. That’s despite a 47% crash inside two years.
On one level then, many of the difficulties that Greggs faces now (particularly rising cost inflation, slowing LFL sales, and weak consumer spending) are nothing new. The firm has faced such challenges before and still went on to create long-term wealth for shareholders.
What is new, however, is that there are expected to be nearly 2,900 shops open by the end of the year. That’s up from 1,480 in 2010.
Have we reached peak Greggs?
Cannibalisation data
If we just consider recent LFL growth, then we might assume the answer to that is yes. Last year, it was just 2.4%, down from 5.5% in 2024 and 13.7% in 2023 (boosted by a mixture of volume and price increases).
But as mentioned, it was almost non-existent in 2010, and yet Greggs kept expanding over time. And in the 10 weeks to 12 May 2026, LFL sales growth was 3.3%, indicating that this metric does move around quite a bit.
Clearly, we hadn’t reached peak Greggs in 2010, despite meagre LFL sales growth. Management doesn’t think we have now, as it’s expanding into new locations in under-penetrated catchments, including supermarkets and on roadsides.
Greggs is aiming for 3,500 shops in future. But to minimise the risk that new openings cannibalise existing shop sales, Greggs continues to analyse customer behaviour.
Current app data shows that where new Greggs stores open within a mile of an existing shop, sales cannibalisation averages just 5%.
| 2010 | 2025 | 2035 | |
| Shops | 1,487 | 2,739 | 3,500+ |
| Revenue | £662m | £2.15bn | ? |
| Diluted earnings per share | 37.3p | 122.8p | ? |
Cheap dividend-payer
Following the crash, Greggs stock is trading at 13 times forward earnings. That’s a significant reduction from its 10-year average of around 22.
And while some discount is arguably warranted due to high inflation, margin pressure, and weak consumer spending, the stock does look good value to me. Especially when you factor in the 4.2% yield.
The short-term outlook is a bit flaky. But taking a five-year view, I think Greggs stock is worth considering snapping up today. It’s one of many cheap FTSE 250 stocks I currently see.
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Ben McPoland has no position in any of the companies mentioned.
