NEXT's (LON:NXT) Dividend Will Be £0.75

NEXT plc's (LON:NXT) investors are due to receive a payment of £0.75 per share on 3rd of January. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

View our latest analysis for NEXT

NEXT's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, NEXT was easily earning enough to 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 13.9%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £1.29 in 2014, and the most recent fiscal year payment was £2.07. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

NEXT Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that NEXT has grown earnings per share at 8.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

NEXT Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for NEXT that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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