Yahoo Finance Is Greggs plc (LON:GRG) A Smart Choice For Dividend Investors?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Greggs plc (LON:GRG) has been paying a dividend to shareholders. Today it yields 2.0%. Let’s dig deeper into whether Greggs should have a place in your portfolio.
Check out our latest analysis for Greggs
Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How does Greggs fare?
The company currently pays out 55% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 51% which, assuming the share price stays the same, leads to a dividend yield of 2.3%. Furthermore, EPS should increase to £0.76.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. GRG has increased its DPS from £0.15 to £0.36 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes GRG a true dividend rockstar.
In terms of its peers, Greggs generates a yield of 2.0%, which is on the low-side for Hospitality stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Greggs is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for GRG’s future growth? Take a look at our free research report of analyst consensus for GRG’s outlook.
Valuation: What is GRG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GRG is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
