What is the ideal dividend investment? Well, to me, it is a company that is reasonably priced, which is growing earnings year by year, and which is highly cash-generative with a high and rising dividend yield.
ASOS (LSE:ASC) has fallen out of favour with the market over the past year as the company has issued numerous profit warnings. However, as the company tries to impress the market by discounting products to drive sales, the company is alienating its suppliers, which could be really bad news for the company.
FTSE indices remained southbound midday with a slew of financial, energy, property and retail stocks acting as dampers. Wall St was mixed overnight and Asian markets were softer, while the Scotland referendum continues to stoke investor caution.
Near noon, the FTSE 100 was down 48.39 points, or 0.71%, to 6755.82. The FTSE 250 fell 148.15 points, or 0.95%, to 15,501.1.
The FTSE 100 enjoyed steady early gains, on the back of solid advances in the US and Asia overnight, but was quick to reach for the reverse gear, despite the latest poll on Scottish independence suggesting voters are leaning towards the ‘No’ side.
At the close, the FTSE 100 was down 30.49 points, or 0.45%, to 6,799.62. The FTSE 250 was down 51.31 points, or 0.33%, to 15,621.40.
Next (LSE:NXT) published its interim results today, reporting "its strongest sales growth for many years".
Total sales were up by 10.3% on the first half of last year, operating profit was up by 19% and the interim dividend rose by a spectacular 39%, to 50p. The firm's operating margin moved higher, too, rising from 18.3% during the first half of last year to an impressive 19.3%.
NEXT achieved sales and profits ahead of its original expectations in the half year ending July 2014. Total sales at £1,849.6m were 10.3% ahead of last year.
Retail stores and NEXT Directory (its online business) both delivered significant growth.
Profit after tax rose by 18.6% to £257.7m.
Strong cash generation has enabled the company to return £223m to shareholders through three special dividends, of which two were paid in the first half. A further £105m has been returned through share buybacks.
In fact, I reckon the shares of the clothing and home products retailer will comfortably outperform the sector and the broader market to the end of 2015, even though those in the bear camp may argue that Next stock is not cheap.
Looking over the FTSE's retailing sector, today I'm comparing the top dedicated of fashion and clothing.
I've picked the four biggest by market cap, which give an interesting spread between the FTSE 100 and AIM. They are NEXT (LSE:NXT), Burberry (LSE:BRBY), ASOS (LSE:ASC) (NASDAQOTH: ASOMF.US) and Mulberry (LSE:MUL).