Here’s how many Greggs shares an investor needs to earn £1,000 a year in passive income
At the start of the year, Greggs (LSE:GRG) shares came with a 2.45% dividend yield. But with the stock price having been almost cut in half since January, thatâs increased to 4.31%.
With the company paying out 69p per share, an investor wanting £1,000 a year needs to buy 1,449 shares. Thatâs £23,227 at todayâs prices. But is such an investment even worth considering?
Investing rules
First things first, £23,227 is a lot of cash and I think itâs only worth considering for someone with significant other investments. Going all-in on Greggs â or any other stock â seems risky to me.
There are, however, situations in which someone might consider a big investment in a particular company. If itâs consistent with maintaining a diversified portfolio, I donât really have an objection.
Another important prerequisite is patience. Iâm looking at the stock as a long-term passive income investment, but this doesnât rule out the chance of further declines in the near future.
Ok, preliminaries out of the way. For investors who have the means and the motive, is Greggs a stock that’s even worth considering as an opportunity at the moment?
Dividend durability
When a dividend yield rises sharply, it can be a sign investors are worried about the sustainability of the payout. But I donât think thereâs much cause for concern on this front in the case of Greggs.
Over the last few years, the companyâs sales have been steadily moving higher. Profits have fallen, but 45.3p in earnings per share more than covers the 19p dividend for the first half of the year.
Given this, expect the FTSE 250 company to maintain its shareholder distribution for the foreseeable future. Dividends are never guaranteed, but Iâm not expecting a cut any time soon.
The more likely reason the stock has been falling, in my view, is the firmâs sales. While these have been increasing, the growth rate has slowed and I think this is weighing on the share price.
Growth concerns
During the first half of 2025, Greggs increased its revenues by 7%. But this was largely the result of opening new stores and there are concerns about how long the firm can keep doing this.
Adjusting for changes in the number of stores, sales growth came in at around 2.6%. Thatâs below the rate of inflation, which is a concern for investors with a long-term view.
Management has put this down to temporary issues, including bad weather and weak consumer confidence. But since the firm canât do anything about these, investors should see them as risks.
These kinds of issues seriously threaten the credibility of Greggs as a long-term growth stock. But from a passive income perspective, the story might be different.
Passive income
Iâm not convinced Greggs has many years of 7% sales growth ahead of it. Iâm sceptical of the firmâs ability to keep opening new stores and revenue increases are likely to be slower after this.
With a 4.31% dividend yield, however, investors might think the company doesnât need to grow much to be a viable passive income investment. And that makes it worth considering.
While the business keeps growing â albeit slowly â I donât see a dividend cut on the horizon. So while £23,227 is no small beer, I think passive income investors should take a look.
The post Here’s how many Greggs shares an investor needs to earn £1,000 a year in passive income appeared first on The Motley Fool UK.
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More reading
- £10,000 invested in Greggs shares 3 years ago is now worthâ¦
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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Greggs Plc. 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.
