Time to buy, after Next shares are lifted by storming FY results?
The Next (LSE: NXT) share price has been falling back, partly hit by the Middle East conflict and rising oil prices. But it had been slipping anyway, down 18% from November’s 52-week high by close on Wednesday (25 March).
But full-year results highlight what chairman Michael Roney describes as “a very good year for Next.” For the year ended January 2026, profit before tax rose 14.5% to reach £1,158m. And earnings per share (EPS), after tax, jumped 17% to 744.2p.
In early trading Thursday (26 March), the Next share price jumped more than 6%. We’re still, however, looking at a year-to-date fall of 12%. But the shares are up more than 50% over five years. And that’s testament to Next’s resilient profitability in the face of a tough period for the very competitive retail sector.
Show us the cash
I rate Next as a cash cow, even if it hasn’t always managed to raise its dividends every year. In 2023, the dividend was reset at a lower level. But we’re back to a spell of growth, with a total of 268p per share proposed for the 2025-26 year. That’s 15% ahead of the 233p paid last year, and it’s very welcome at a time when inflation is back on the horizon.
The cash does represent a dividend yield of only 2.2% on Wednesday’s closing Next share price. But the company has long had a policy of including share buybacks and other methods in its cash returns to shareholders.
The year just ended saw a modest total of £131m spent on buybacks. But Next also returned £421.5m via a B share capital distribution scheme. That’s an impressive total cash return of £839m.
The board plans to raise the current year’s buybacks to £500m. But if its share price cap of £131 should put a limit on it, the remainder will be handed over as a special dividend or capital distribution.
What to do?
So, the big question. Should we consider buying Next shares now? With a long-term view, I reckon it could be a very good plan to at least keep Next on our shortlists. For the more medium term, I’d say it depends largely on two things — outlook and stock valuation.
The planned buyback marks a key part of management outlook. And in addition, the board expects total ordinary dividend payouts to increase to £324m, from the £286.5m over the past year. And we should see those dividends very strongly covered by expected earnings, at around 2.8 times.
On the valuation front, a forward price-to-earnings (P/E) ratio of over 16 might look a bit high. Normally, I’d say Next deserves a premium valuation thanks to its track record. But we’ve no idea how hard the fallout from current geopolitical events might affect retail businesses. Headlines already predict a new inflation surge, and some observers expect an extended period of pain.
So a period of share price volatility might be on the cards. But I rate Next as the best in its sector, and I suggest long-term FTSE 100 investors should seriously consider it.
The post Time to buy, after Next shares are lifted by storming FY results? appeared first on The Motley Fool UK.
Should you invest £1,000 in Next Plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Next Plc made the list?
More reading
- Next impresses again, but could its shares be about to crash?
- Is a stock market crash coming? Itâs not too late to get ready!
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
