Yahoo Finance NEXT's (LON:NXT) Dividend Will Be Increased To £1.40
NEXT plc (LON:NXT) will increase its dividend from last year's comparable payment on the 1st of August to £1.40. This will take the annual payment to 3.1% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for NEXT
NEXT's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, NEXT was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 0.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was £1.05, compared to the most recent full-year payment of £2.06. This means that it has been growing its distributions at 7.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. NEXT might have put its house in order since then, but we remain cautious.
We Could See NEXT's Dividend Growing
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that NEXT has grown earnings per share at 7.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for NEXT's prospects of growing its dividend payments in the future.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for NEXT that you should be aware of before investing. Is NEXT not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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