Why NEXT plc Should Be A Candidate For Your 2014 ISA

NEXT plc (LON: NXT) is possibly our best high-street investment.

Alan Oscroft

Alan is a freelance writer who began writing for The Motley Fool in the late 1990s. He has been a private investor for more 30 years, and has explored a number of strategies, settling on high-yielding blue-chip shares.

Published 25 March, 2014 4:20 pm GMT

| More on: NXT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

With its share price up more than 55% over the past 12 months to 6,803p, you don’t need me to tell you that NEXT (LSE: NXT) has had a great year.

But the foundations for that year lie further back, when we were starting to enter that nasty recession and NEXT’s neighbours were waking up to the fact that they were being overtaken by a huge change in the way we shop — that old Internet thing.

Ahead of the game

And while 21st-century shopping habits were sending some into tailspin, NEXT hardly noticed — because it was ahead of the game, with multi-channel retailing somewhat old hat. The infrastructure (and perhaps more importantly, the mindset) had been there for years in the shape of NEXT Directory.

For the year just ended in January, NEXT Directory sales accounted for 38% of total NEXT brand sales, bringing in £1.34 billion! That was up 12.4% from a year previously, with total sales up 5.4% — no wonder the company described it as “a great year for NEXT“!

In fact, underlying earnings per share rose 23% to 366p, and the total dividend was boosted by 23% to 129p per share.

And through the five-year hell that was the high street, which saw the likes of Marks & Spencer, Dixons and HMV struggling, and some like Woolworths going to the wall, NEXT just kept on increasing its earnings per share (EPS), year after year after year.

Want some?

Does that sound like the kind of company that might have a good shout for some of your ISA allowance for the coming year?

Well, you can protect up to £15,000 from tax come July this year, and I reckon those who allocate some of it to NEXT with a view to holding onto the shares until they retire should do nicely!

A tidy sum

Cash Growth for the next couple of years is forecast to be a bit lower, but still a healthy 8% per year.

If NEXT could sustain that over the next 20 years with the share price going in step to keep its P/E valuation steady, and we keep seeing dividend yields of around 2%, a £1,000 investment in NEXT today could be worth a very nice £6,700 in 20 years time if dividends are reinvested. And that easily beats the £1,300 that a typical cash ISA would likely get you.