Every time I tuck into a sausage roll I get an irresistible urge to invest in bakery chain Greggs (LSE: GRG) shares for some reason. That’s a problem though. While the sausage roll only costs a couple of quid, I wouldn’t invest less than £1k in a stock and I don’t have that right now.

And when I do, I’ll probably buy BP shares first, because they’ve been on my shopping list for yonks and look good value as the oil price falls below $80 a barrel.

So where do I raise the money? How about insurance conglomerate Phoenix Group Holdings (LSE: PHNX), which I hold inside my self-invested personal pension (SIPP)? Phoenix has the highest yield on the entire FTSE 100, (if you ignore Vodafone Group, which cuts its dividend in half next year).

Swapping income for growth

Phoenix has a meaty trailing yield today of 10.69%. I did my research before buying it in January, and decided there was a fair chance it was sustainable. Fingers crossed! All dividends are mortal, and double-digit yielders have a particularly high death rate.

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

The drawback with Phoenix is that while it’s great at paying dividends, it’s struggled to deliver share price growth. Its shares are down 11.79% over the last year, and 27.87% over five years.

It did bounce in March after delivering a positive set of full-year results, with revenues, profits and new business all climbing. It also generated £2bn cash, beating its upgraded target of £1.8bn and supporting the dividend.

Yet the Phoenix share price soon sank back into the doldrums, and I’m wondering whether a better use of my dividend would be to invest it into a company with higher growth prospects. Step forward Greggs.

FTSE 250 growth stock

The Greggs share price is up 7.33% over one year and 32.85% over five years. By reinvesting my Phoenix dividends into its shares, I could potentially generate both income and growth over time. So should I do it?

Greggs is red hot right now with total 2023 sales jumping 19.6% to £1.8bn. Its update on 14 May served up another 13.7% total sales growth for the first 19 weeks of 2024. That’s despite “challenging conditions” as the cost-of-living crisis drags on.

The FTSE 250 group now boasts 2,500 stores, after opening another 64, and is expanding into ice drinks including coffee, flavoured lemonades and coolers.

There’s a problem though. Greggs shares look fully priced after their strong run, trading at 23.42 times earnings. That compares 15.6 times earnings for Phoenix. I think I’ve left it too late.

Greggs’ yield is inevitably much lower at 2.11%. Phoenix pays five times as much income, and its shares are cheaper at 15.6 times earnings. Sorry Greggs. I think I’ll stick with my original plan and reinvest my dividends back into Phoenix. If the dividend holds I’ll double my money in just over seven years, with any share price growth on top.