Iconic British fast-food brand Greggs (LSE: GRG) has seen its share price drop 42% in just over a year. I think this largely reflects weaker consumer spending due to cost‑of‑living pressures and rising business costs that have squeezed margins.
However, it continues to deliver steady sales growth, and its store‑expansion programme remains on track.
Consequently, I do not believe the business has stalled, as its share price might suggest. Instead, I think it has shifted into a more mature phase.
Even in this mode, I believe it has much to offer a certain type of investor. So what exactly is that?
Solid dividend yield
Greggs’ current 4.2% dividend yield compares favourably to the FTSE 250’s 3.5%.
Analysts forecast a 69.4p dividend this year and 71.8p in 2027, implying yields of 4.2% and 4.4%.
So, investors considering a £20,000 holding would make £11,029 in dividends after 10 years. This reflects an average 4.4% yield, although this could change over time. It also assumes the dividends being reinvested back into the stock.
On the same basis, the dividends could potentially rise to £54,688 after 30 years.
Including the original £20,000 stake, the holding could be worth £74,688 and produce £3,287 a year in income at that point.
How have recent results looked?
A company’s dividends, and share price, are ultimately powered by earnings growth. A risk for Greggs is a continued rise in the cost‑of‑living crisis reducing customer spending.
Nonetheless, its 2024 results, released on 16 April 2025, showed record sales of £2.14bn and record profits of £203.9m. It also overtook McDonald’s as the UK’s top breakfast takeaway in 2023 and has retained that position.
In its H1 2025 update, total sales rose 6.9% year on year to £1.03bn. Management noted full‑year operating profit may come in modestly below 2024 levels. However, it reiterated that the store expansion programme remains on track, with 120 net new openings targeted this year.
Its Q4 results saw total sales up 7.4%. It is due to release its full-year 2025 results on 3 March.
Capital appreciation potential
A major sign of confidence came in December, when JP Morgan initiated coverage of Greggs at Overweight. It believes the shares will outperform other stocks in the sector. It argued that “more resilient‑than‑expected” sales and strong earnings from fiscal-year 2026 could drive a significant re‑rating.
Its base-case outlook assumes like-for-like sales growth of 2.5% this year, rising toward 3%-3.5% in subsequent years. Gross margins are forecast at 61.2% for 2026/27, improving to 61.8%.
Underlying earnings before interest and taxes margins are expected to climb from 8.4% in 2025 to 8.5% in 2027, approaching 9.8% by 2030.
Given these parameters, it placed a December 2027 price target of £21.10 on the shares — a 29% increase from the current £16.33 price.
These numbers reflect my own discounted cash flow modelling, based around the same earnings growth forecasts and a discount rate of 8.5%.
My investment view
Greggs is not for me at this stage of my investment cycle.
Over 50, I focus on shares offering much greater dividend yields to provide me with high income in retirement.
However, for investors earlier in their investment journey — particularly those seeking a blend of income, stability, and long‑term compounding — I think Greggs is well worth considering.
