What next for Next’s dividend?

Retailer Next has announced that it will be closing all its shops for now. What does that mean for its dividend?

Lord Wolfson, Next’s CEO, has said that the retail industry “is facing the toughest time since the oil crisis of 1973”, says Ashley Armstrong in The Times. This crisis will cost the group up to £1bn. This week it announced that it will be closing all its shops for now.

However, Wolfson is confident that it will be able to survive thanks to a strong balance sheet; it also has options such as suspending its share-buyback programme and dividend, and delaying capital spending.

Good idea, says Ben Marlow in The Daily Telegraph. While there is “no way of predicting what effect Covid-19 will have on the industry”, Lord Wolfson has “been wargaming for years” to prepare his company for the “multiple doomsday scenarios” facing the high street. He has produced a “15-year stress-test of Next’s prospects” that is “astonishing in its scope and detail”. Given his realism, it is not surprising that Wolfson’s statement has pushed up Next’s shares.

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Not so fast, say Jamie Nimmo and Harriet Dennys for The Mail on Sunday. It’s true that cutting or suspending dividends will help companies such as Next “to weather the storm and protect jobs”. But consider the bigger picture.

The news that “one of the high street’s strongest” firms is contemplating delaying its payout to shareholders is hardly good news for investors. Analysts warn that if Next is thinking of cutting, dividends, then “frankly pretty much no one is safe”, as even the biggest dividend payers in Britain “could be forced to follow suit”, with investors facing “billions of pounds worth of cuts to payouts”.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri