NEXT (LON:NXT) Has Announced A Dividend Of £0.87

NEXT plc's (LON:NXT) investors are due to receive a payment of £0.87 per share on 5th of January. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

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NEXT's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, NEXT's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 23.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Check out our latest analysis for NEXT

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was £3.00, compared to the most recent full-year payment of £2.33. Doing the maths, this is a decline of about 2.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. NEXT has seen EPS rising for the last five years, at 21% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

NEXT Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 NEXT analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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