Greggs (LSE: GRG) shares have endured a difficult stretch, falling 8% over the past year and a steep 41% over the past five years.
Despite that weak price performance, the London-listed baker continues to attract income-focused investors through its dividend yield, which currently sits at 4.3%.
That yield is notably higher than the 3.4% average offered by the broader FTSE 250 index, of which Greggs remains a constituent member.
The company paid an ordinary dividend of 69p per share for the full year, meaning an investor holding 1,000 shares would collect £690 annually from that payout alone.
At a current share price of around £15.95, purchasing 1,000 shares would require an outlay of close to £16,000, making the income return relatively accessible for retail investors.
Last year, Greggs held its ordinary dividend flat and, unlike the prior year, did not issue a special dividend on top of the regular payout.
The company’s underlying profit before tax fell 9% year on year in the most recent full-year results, even as revenues grew by 7%, a combination that raises questions about future dividend growth.
Greggs has maintained its full-year outlook, guiding that profits will land at a broadly similar underlying level to the prior year, which analysts suggest leaves little room for a dividend increase.
The company is due to release its interim results on 29 July, which will offer investors a clearer picture of trading momentum and any update on capital distribution plans.
Greggs has flagged costs associated with a new distribution centre in Derby as a headwind to this year’s numbers, though a dividend cut remains an unlikely outcome given the company’s profitable and cash-generative operations.
Any reduction in the dividend could further damage already fragile investor sentiment and risk pushing the share price even lower, giving the board strong reason to at least maintain the current payout level.
Analyst Christopher Ruane, who owns Greggs shares and has stated no plans to sell them, argues the investment case extends well beyond the dividend yield alone.
Ruane points to the growing gap between rising revenues and the falling share price as a potential opportunity for capital appreciation over the medium to long term.
He acknowledges real risks, including inflation pressuring profit margins, poor demand planning that contributed to a profit warning last summer, and the possibility of consumer brand fatigue given the high density of Greggs outlets.
Nevertheless, Ruane views the current share price as undervalued, citing the company’s proven business model, budget-friendly value proposition, and powerful brand recognition as durable competitive strengths.
