Next’s dividend and negative interest rates could shape the market this week

The FTSE 350 crept up 1pc last week whilst European and American markets fluctuated. Oil prices remained on the back foot at the end of a volatile week, staying below $40 (£31.20) per barrel, an important threshold for both oil stocks and major oil producing countries.

Gold prices only shone intermittently last week despite signs of reduced risk appetite with the $2,000 mark reached in August looking fairly distant for now.

In the FTSE 350, the best performers of last week were Royal Mail, which leapt 33pc, followed by fantasy gaming company Games Workshop. At the bottom of the pack was First Group and SSP with both firms falling around 14pc – SSP was a top performer the week before so has had a big tumble.

This week we have first-half results from Next and a monetary policy decision from the Bank of England.

Thursday September 17

Next, first-half results

Back in July an update said Next’s trading had been less bad than feared so investors will need to scrutinise how the outlook now measures up against the scenarios previously outlined by chief executive Lord Simon Wolfson.

After a first-half sales drop of 33pc year-on-year – Next provided three possible scenarios for the rest of 2020: sales down 5pc, 19pc and 33pc. This which would leave the full-year down 18pc, 26pc or 33pc.

Under the mid-point scenario, Next expected pre-tax profits of £195m for the full- year, with a best outcome of £330m and a worst-case of £15m. That compares to £729m a year ago and Lord Wolfson’s previous guidance mid-point of zero.

Under that same mid-point scenario, Next suggested that net debt would fall by £460m, despite lower sales and profits, thanks to the scrapping of a share buyback programme, cancellation of dividend, asset sales and cuts in investment.

If that forecast proves correct then group net debt will drop to around £650m, well within the FTSE 100 firm’s banking facility limits.

The final point of interest will be the dividend, and this will be a decisive point for Telegraph Fantasy Fund Managers.

Next announced back in April that it would not pay an interim dividend, adding it would be unlikely to announce a final payment next January either.

However, eight FTSE 100 firms that cancelled dividends have since recommenced them and with trading coming in better than expected – at least so far – some may be tempted to ask whether Next might do the same.

Last year Next paid an interim dividend of 57.5p a share but then cancelled its final payment of 110p and intriguingly the current forecast is for a full-year payment of just over 41p a share.

Delivering a dividend at this point would likely see the share price rally so investors should monitor any changes.