Stock market

Should I reinvest my 10.7% yield from Phoenix Group Holdings into Greggs shares?

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Every time I tuck into a sausage roll, I get an irresistible urge to invest in a bakery chain. Griggs (LSE: GRG) shares for some reason. This is a problem though. While a sausage roll only costs a few quid, I wouldn’t invest less than £1k in a stock and I don’t have it yet.

And when I do, I’ll probably buy. B.P Shares first, as they are on my buy list for Yunc and look like good value with oil prices below $80 a barrel.

So where do I collect the money? What about group insurance? Phoenix Group Holdings (LSE: PHNX), which I hold in my Self-Invested Personal Pension (SIPP)? Phoenix has the highest overall yield. FTSE 100(if you ignore Vodafone Groupwhich cuts its profits in half the following year).

Converting income to growth

Phoenix has a matte trailing yield of 10.69% today. I did my research before buying it in January, and decided it had a good chance of being durable. Fingers crossed! All returns are mortal, and double-digit yielders have a particularly high mortality rate.

Phoenix paid me its first dividend of several hundred pounds in May, which was nice. I did what I always do with profits, and reinvested it back into his stock.

The problem with Phoenix is ​​that while it is great at paying dividends, it has struggled to deliver share price growth. Its shares are down 11.79% year-to-date and 27.87% over five years.

It bounced back in March after delivering positive full-year results, which saw revenue, profit and new business rise. It also generated £2bn of cash, beating its upgraded £1.8bn target and supporting the dividend.

Yet Phoenix’s share price soon plunged back into despair, and I’m wondering if my dividend would be a better use to invest in a company with greater growth potential. Go ahead Greggs.

FTSE 250 Growth Stocks

Greggs’ stock price has risen 7.33% in one year and 32.85% in five years. By reinvesting my Phoenix dividend into its shares, I can potentially generate both income and growth over time. So should I do this?

Greggs is currently in the red with total 2023 sales expected to rise 19.6% to £1.8bn. Its update on May 14 showed a further 13.7% increase in sales for the first 19 weeks of 2024. “Difficult Situations” The cost of living crisis continues to grow.

gave FTSE 250 The group now boasts 2,500 stores after opening 64 more, and is expanding into ice drinks including coffee, flavored lemonade and coolers.

There is one problem though. Trading at 23.42 times earnings, Griggs shares look well-valued after their strong run. That compares to 15.6 times earnings for Phoenix. I think I left it too late.

Greggs’ yield is inevitably much lower at 2.11%. Phoenix pays more than five times earnings, and its shares are cheap at 15.6 times earnings. Sorry Greggs. I think I will stick with my original plan and reinvest my profits back into Phoenix. If the dividend holds, I will double my money in just seven years, with any increase in the share price.


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