There’s no such thing as picking a guaranteed winner when it comes to the stock markets. It’s hard enough to predict where a company will be in five years’ time, let alone in the decades between now and when millions of us will be ready to retire.
But one thing that can always be banked on is our love of a hot beverage and something sweet to go with it. And this means Greggs (LSE: GRG) is a share I expect to continue thriving many, many years into the future.
Hot drinks have formed a key part of our diet since Samuel Pepys was supping the “China drink” in London tea rooms as far back as the 1660s and, as recent trading details from Greggs shows, our love affair with the beverage is going from strength to strength.
According to the FTSE 250 baked goods and drinks retailer, like-for-like sales in its company-managed stores ballooned 11.1% in the first 19 weeks of the year, a barnstorming result which reflected “increased customer visits have continued to drive strong trading in traditional categories and new products.”
It doesn’t matter that consumer spending power in the UK is under the cosh right now. The evergreen allure of Greggs’ traditional lines, combined with the low price point of its goods versus those of its rivals, such as Pret A Manger, means its till rolls continue to grow at a spectacular rate.
On a roll
It’s not all down to prices and paper cups of tea, though. You cannot underestimate the beneficial impact which Greggs’ menu-enhancing measures have had on sales, steps designed to cotton on to changing consumer trends and generate some excellent publicity, to boot.
Take the rollout (pun intended) of its much-publicised vegan sausage roll earlier this year, a move which has allowed it to ride the surge towards non-meat, non-dairy foods from Millennials in particular. Cue the media storm and Greggs stores subsequently running dry of their new statement product in the first few weeks of introduction.
This menu revamp has been years in the making, though, with new ranges of sandwiches, coffee blends, and healthy options all attracting legions of new customers. Consequently, the retailer picked up award after award for its new product lines.
Greggs is clearly a share on the up and up, and I’m predicting even better things to come in the years ahead as it actively builds a network of almost 2,000 stores and doubles-down on manufacturing investment.
And clearly this bodes well for future profits growth and, naturally, for Greggs’ long-time progressive dividend policy to keep delivering the goods. The full-year payout was hiked 11% in the last fiscal year and City analysts are predicting further chunky rises in the medium term at least, from 35.7p per share to 39.2p this year and, again, to 41.8p in the next period.
Sure, subsequent yields of 1.8% and 1.9%, respectively, might not be the biggest. But if you’re seeking brilliant dividend expansion for many years to come, I reckon Greggs is a great horse to bet on today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.