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.
