Attention dividend hunters! Next Plc (LSE:NXT) will be distributing its dividend of £0.45 per share on the 25 January 2018, and will start trading ex-dividend in 3 days time on the 04 January 2018. Is this future income a persuasive enough catalyst for investors to think about Next as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. Check out our latest analysis for Next
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has it increased its dividend per share amount over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does Next fit our criteria?
The current payout ratio for the stock is 36.73%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 39.90%, leading to a dividend yield of around 3.90%. Furthermore, EPS is forecasted to fall to £4.01 in the upcoming year. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 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. Compared to its peers, Next generates a yield of 3.49%, which is high for multiline retail stocks but still below the market’s top dividend payers.
What this means for you:
Are you a shareholder? Investors of Next can continue to expect strong dividends from the stock moving forward. With its favorable dividend characteristics, Next is one worth keeping around in your income portfolio. However, depending on your current holdings, it may be beneficial exploring other income stocks to improve your diversification, or even look at high-growth stocks to supplement your steady income stocks. I encourage you to continue your research by exploring my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? With this in mind, I definitely rank Next as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. As with all investments, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. No matter how much of a cash cow Next is, it is not worth an infinite price. Is Next still a bargain? Take a look at our latest free analysis to find out!
To help readers see pass 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.