Here’s Greggs’ share dividend forecast until 2026

As with most dividend-paying stocks, the cash consideration Greggs Shares (LSE:GRG) have collapsed following the Covid-19 outbreak. In this case, dividend payments were stopped in the financial year ending January 2021 after stores were closed due to the lockdown.

But FCS index 250 The bakery products retailer has restructured its dividend policy in the wake of the pandemic. Annual payouts have increased by low to mid-single digit percentages. And Greggs also paid investors a special dividend last year.

City analysts expect dividend growth to accelerate over the next few years:

Year	Dividend per share	Dividend growth	Dividend yield
2024	68.73p	11%	2.6%
2025	72.86p	6%	2.7%
2026	78.62r	8%	2.9%

As we’ve seen during the pandemic, dividends are never guaranteed. So I need to think about how realistic these projections are.

Based on this, and Greggs’ stock price forecast, should I buy the superstar baker for my portfolio?

Strong forecasts

The first and simplest thing to consider is how well projected dividends are covered by expected earnings.

Greggs is expected to grow earnings by 7-8% in each of the next three years. It’s nice that dividend coverage doubled during this period. An indicator of 2 times or higher provides a decent safety cushion in case income falls.

The next thing to look at is the strength of the company’s balance sheet. Greggs is performing well on that front as well.

The company has no debt and ended the first half of 2024 with a cash balance of £141.5 million. This prompted the company to raise its interim dividend by almost 19% year on year to 19 pence per share.

However, Greggs has warned it expects cash to fall as it continues its store opening program and invests in production and distribution.

Hard Fall

So overall, I think Greggs is in excellent shape to meet current dividend guidance. But does this make the company a good investment?

After all, the company’s stock price fell sharply after its third-quarter trading report was released on October 1. They showed that like-for-like sales growth fell to 5%. Incomes could also continue to decline if inflation pressures curb consumer spending.

However, overall I think Greggs is a compelling stock to buy right now. In fact, I just bought it on the dip for my Self Invested Personal Pension (SIPP).

Best choice

I believe the market overreacted to news of slowing sales. Following the price drop, Greggs’ price/earnings (P/E) ratio fell below 20 times to 19.8 times.

I think this valuation is more than fair for a stock of this level. Past performance is no guarantee of future earnings, but its share price has soared 340% since 2014 as robust growth has led to higher profits.

When combined with dividends, the total return is close to 500% over the period.

In my opinion, there is good reason to expect a recovery in the Greggs share price. The ambitious expansion continues, with the company adding capacity to 3,500 stores, up from 2,560 stores today. This includes building stores in tourist destinations and increasing the number of franchise outlets.

On top of that, the retailer’s push to increase delivery and click-and-collect services is paying off handsomely. And in the evenings he plans an attack on a very profitable food market with him.