Greggs (LSE:GRG) shares have climbed 55% over 5 years, considerably outperforming the FTSE 250 index. It is a helpful reminder that corporations don’t must be on the chopping fringe of technological developments to ship spectacular returns. Sausage rolls could be simply as profitable.

However how does the agency stack up from a passive revenue investor’s perspective? And might the Greggs share price proceed to outperform different FTSE shares over the approaching years?

Let’s tuck in to the element.

The Greggs dividend

At the moment, Greggs shares provide a dividend yield a bit decrease than 2.1%. At first look, that may not be an thrilling quantity. It’s under the typical throughout each FTSE 100 shares (3.6%) and FTSE 250 shares (3.3%).

Nevertheless, for traders who prioritise dividend reliability over a excessive yield, the corporate’s payout historical past appears to be like spectacular.

Shareholders have been rewarded with constant passive revenue for many years. In latest historical past, the one transient interruption in dividend funds got here in 2020 because of the pandemic. Distributions had been promptly resumed in 2021.

Moreover, the dividend appears to be like properly lined at the moment at two instances forecast earnings. This means a large margin of security.

If I had a spare £5,000 to put money into Greggs, I’d be capable of purchase 159 shares at at the moment’s price. That will produce £104.41 in passive revenue every year, assuming the dividend continues.

Sturdy progress outlook

Nevertheless, I believe the actual attraction of Greggs shares is the potential for capital appreciation, moderately than dividend funds. Removed from reaching the boundaries of its progress, the bakery chain has recognized loads of alternatives to spice up its backside line.

Enlargement plans are within the works. The group plans to open 140 to 160 web new outlets this yr. The long-term goal is to achieve a complete of over 3,500 branches within the UK, up from 2,500 at the moment. As well as, maintaining extra shops open within the evenings is one other key goal.

At the moment, round half of the agency’s shops are open previous 7pm. Gross sales made after 4pm are rising quicker than common and the enterprise expects this transfer might add round £180m to its revenues.

Greggs has additionally elevated salaries for its 32,000-strong workforce and doesn’t plan to extend product costs for the rest of the yr. This could assist to help worker loyalty and it’s proof of a agency in sturdy monetary well being.

A premium valuation

There’s lots to love in regards to the course of journey for Greggs, however arguably a lot of the expansion potential is already priced in at the moment. The shares commerce at a ahead price-to-earnings (P/E) ratio of 21.4, in order that they’re not notably low-cost.

The valuation’s properly above the typical for FTSE 100 and FTSE 250 shares. This might pose dangers for additional share price progress if the enterprise fails to dwell up to excessive expectations.

Ought to traders contemplate shopping for?

General, Greggs shares appear to be a strong choose to me for capital progress and a pleasant little bit of passive revenue. The dividend won’t be excellent, however I view it as a helpful bonus for shareholders moderately than the first purpose to speculate.

An expensive valuation ought to give traders some meals for thought, however within the spherical I believe this inventory might show to be a tasty long-term funding. It’s actually one price contemplating.