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What a horrible yr 2026 has been for shareholders of Greggs (LSE: GRG), the high-street bakery chain. Greggs shares have been one of many worst performers within the mid-cap FTSE 250 index this calendar yr, regardless of surging strongly from 2022 to 2024. At one level, they’d greater than halved from their 2025 excessive, however have bounced again arduous since I warned they have been deeply undervalued.
Ghastly Greggs
First off, my household portfolio owns Greggs shares, having paid 1,683p a share in July for our holding. We purchased this inventory as a result of I noticed the group as a ‘fallen angel’ — a strong firm whose shares have been struggling. Alas, Greggs turned out to be a falling knife that bloodied my fingers for 5 months.
At its 52-week excessive, the Greggs share value briefly hit 2,890p on 8 January, however has crashed arduous since. Certainly, the inventory hit its 2025 low of 1,407.2p on 25 November — very day that I argued it was deep in Mr Market’s cut price bin.
At that low, our stake had misplaced virtually a sixth (−16.4%) of its worth, leaving me feeling a little bit of a chump. But how rapidly fickle buyers can change their minds! Since then, the wave of promoting strain has become a flood of buys, driving Greggs shares dramatically larger in lower than a month.
As I write, this widespread share trades at 1,710p, valuing the enterprise at virtually £1.8bn. That’s up greater than a fifth (+21.5%) from its yr low — however my article in all probability had no half on this spectacular comeback. As an alternative, rumours of a stake being amassed by an activist investor seemingly contributed to this sudden surge.
Getting higher?
One motive we purchased this smashed-up inventory was for its market-beating dividends. On 25 November, Greggs’ dividend yield topped out at 5% a yr — method forward of the elite FTSE 100‘s yearly money yield of underneath 3.2%.
After all, because the Greggs share value rebounded, its dividend yield fell again. This now stands at 4% a yr. For me, that’s a good reward for holding this inventory for the long run whereas awaiting restoration, maybe pushed by larger gross sales development and margins.
Moreover, this inventory trades on a modest a number of of 11.8 instances historic earnings, delivering an earnings yield of almost 8.5% a yr. Because of this Greggs’ dividends are lined greater than twice by trailing earnings, which is a beneficiant margin of security.
Summing up, regardless of the shares taking pictures up previously three weeks, I haven’t modified my view on this inventory. I see Greggs as a terrific match within the worth/revenue/dividend core of our portfolio, so we received’t be promoting anytime quickly.
Then once more, issues may get more durable for retailers in 2026. Chancellor Rachel Reeves is elevating enterprise charges, hitting Greggs’ 2,650 shops. And decrease margins would drive the group to promote extra steak bakes, sausage rolls, and sandwiches to keep up its income. Even so, this nice British enterprise has been rising steadily since opening its first store in 1951. Thus, I’ve excessive hopes for the following few years!
What different shares are making waves out there proper now?
