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Investors who want to cash in on NEXT plc’s (LON:NXT) upcoming dividend of UK£0.55 per share have only 4 days left to buy the shares before its ex-dividend date, 06 December 2018, in time for dividends payable on the 02 January 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into NEXT’s latest financial data to analyse its dividend attributes.
See our latest analysis for NEXT
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Can it afford to pay the current rate of dividends from its earnings?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does NEXT fare?
The current trailing twelve-month payout ratio for the stock is 38%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect NXT’s payout to remain around the same level at 37% of its earnings, which leads to a dividend yield of around 3.4%. In addition to this, EPS should increase to £4.45.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, NEXT generates a yield of 3.2%, which is on the low-side for Multiline Retail stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank NEXT as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should look at:
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Future Outlook: What are well-informed industry analysts predicting for NXT’s future growth? Take a look at our free research report of analyst consensus for NXT’s outlook.
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Valuation: What is NXT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NXT is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.