Image source: Getty Images
What a terrible year 2026 has been for shareholders of Greggs (LSE: GRG), the high-street bakery chain. Greggs shares have been one of the worst performers in the mid-cap FTSE 250 index this calendar year, despite surging strongly from 2022 to 2024. At one point, they had more than halved from their 2025 high, but have bounced back hard since I warned they were deeply undervalued.
Ghastly Greggs
First off, my family portfolio owns Greggs shares, having paid 1,683p a share in July for our holding. We bought this stock because I saw the group as a ‘fallen angel’ — a solid company whose shares were suffering. Alas, Greggs turned out to be a falling knife that bloodied my fingers for five months.
At its 52-week high, the Greggs share price briefly hit 2,890p on 8 January, but has crashed hard since. Indeed, the stock hit its 2025 low of 1,407.2p on 25 November — very day that I argued it was deep in Mr Market’s bargain bin.
At that low, our stake had lost almost a sixth (−16.4%) of its value, leaving me feeling a bit of a chump. Yet how quickly fickle investors can change their minds! Since then, the wave of selling pressure has turned into a flood of buys, driving Greggs shares dramatically higher in less than a month.
As I write, this popular share trades at 1,710p, valuing the business at almost £1.8bn. That’s up more than a fifth (+21.5%) from its year low — but my article probably had no part in this impressive comeback. Instead, rumours of a stake being amassed by an activist investor likely contributed to this sudden surge.
Getting better?
One reason we bought this smashed-up stock was for its market-beating dividends. On 25 November, Greggs’ dividend yield topped out at 5% a year — way ahead of the elite FTSE 100‘s yearly cash yield of under 3.2%.
Of course, as the Greggs share price rebounded, its dividend yield fell back. This now stands at 4% a year. For me, that’s a decent reward for holding this stock for the long term while awaiting recovery, perhaps driven by higher sales growth and margins.
Furthermore, this stock trades on a modest multiple of 11.8 times historic earnings, delivering an earnings yield of nearly 8.5% a year. This means that Greggs’ dividends are covered more than twice by trailing earnings, which is a generous margin of safety.
Summing up, despite the shares shooting up in the past three weeks, I haven’t changed my view on this stock. I see Greggs as a great fit in the value/income/dividend core of our portfolio, so we won’t be selling anytime soon.
Then again, things might get tougher for retailers in 2026. Chancellor Rachel Reeves is raising business rates, hitting Greggs’ 2,650 outlets. And lower margins would force the group to sell more steak bakes, sausage rolls, and sandwiches to maintain its profits. Even so, this great British business has been growing steadily since opening its first shop in 1951. Thus, I have high hopes for the next few years!
What other shares are making waves in the market right now?
