Greggs (LSE: GRG) shares are up 6% yr up to now, barely above the FTSE 250‘s return of three.4%. This continues their development of outperforming the mid-cap index over a few years.

Whereas the excessive avenue baker additionally pays a dividend, the abnormal yield of two.2% is beneath the FTSE 250 common (3.3%). Nevertheless, the inventory does are inclined to reward shareholders with particular dividends too.

So, how a lot would I must fork out to goal for £1,000 in passive earnings throughout the subsequent two years? And would I purchase extra Greggs shares immediately? Let’s dig in.

Passive earnings

Brokers presently forecast 68.2p per share for the present monetary yr and 75.5p per share for subsequent yr. In the event that they turn into right, it means I’d want 700 shares to goal for £1,000 in dividend earnings over this era.

Based mostly on immediately’s share price of two,756p (£27.56), these would set me again round £19,292. That’s not chump change, a minimum of not for me, that means I’d personally slightly unfold such a sum round a handful of shares.

Nevertheless, Greggs additionally has a coverage of returning surplus money to shareholders within the type of particular dividends. For FY23, it paid an additional 40p per share (acquired in Might with the ultimate dividend).

If it did so once more in FY24 and FY25, that might elevate the two-year payout from 700 shares to above £1,500.

This isn’t assured although, particularly because the agency is ramping up its capital expenditure to £250m-£280m this yr (from £200m) to drive progress within the enterprise. Finally, no payouts are set in stone.

Peak Greggs?

Final yr, gross sales rose by nearly 20% to £1.8bn whereas it delivered document earnings of £188m (up 27%). And having just lately reached 2,500 places, it’s now on observe to develop its community to three,000 retailers.

Some buyers thought we’d have lengthy reached ‘peak Greggs’ by 2024. Nevertheless, the agency retains discovering methods to develop gross sales. Listed here are some:

• Opening for longer within the night
• Driving elevated loyalty by the app
• Delivering meals on Uber Eats in addition to Simply Eat
• Increasing partnerships with retailers together with Primark, Tesco, and Sainsbury’s
• Growing franchise partnerships, particularly in forecourts

In 2023, it even overtook McDonald’s to develop into the UK’s hottest breakfast vacation spot.

Skinny jabs

Within the first 19 weeks of 2024, like-for-like gross sales progress was 7.4%. So the Greggs progress story rolls on.

Nevertheless, one danger I’m keeping track of right here is GLP-1 weight-loss medication (nicknamed ‘skinny jabs’). These are recognized to work by decreasing urge for food and may result in fewer cravings for snacks and baked items.

There are tens of millions of chubby folks within the UK that might finish up on these medication over the subsequent few years. If administration begins mentioning the dreaded ‘W’ phrases — ‘weight-loss drugs’ or particularly ‘Wegovy‘ (Novo Nordisk‘s blockbuster GLP-1 drug) — the inventory might get hammered.

Talking as a shareholder, I’m reassured that Greggs is already adapting by providing more healthy menu choices. For instance, it just lately gained a wholesome consuming award for its candy potato bhaji and rice salad bowl.

The inventory is buying and selling at round 19 occasions ahead earnings. I feel that’s truthful worth, so I’d take into account including Greggs shares to my portfolio immediately if I didn’t already personal them.