Investors love dividends for many reasons. They provide assurance that a company is financially healthy enough to reward investors. Dividend stocks tend to perform better in market downturns and recessions. Dividends may offer tax advantages and help mitigate losses. And they offer total return (stock appreciation plus distributions), which is attractive for income-seeking investors. So a big dividend hike, like at Costco Wholesale Corp. (NASDAQ: COST) last year, is sure to garner investor attention.
Costco’s quarterly dividend increased last year from $0.90 per share to $1.02, a 13.3% increase. But that’s not all, because the retailer also paid out a special dividend of $15 a share last year. Together, that equates to an increase of 381.8% for the year. The company is no stranger to special dividends. It also paid them out in 2012, 2015, 2017, and 2020, with the most recent being the largest.
Costco has also been a Wall Street darling with all but one of the 36 analysts covering the stock having favorable outlooks for next year. One analyst even has a price target of $905 over the next 52 weeks.
Costco is not a Dividend Aristocrat, meaning that it has not increased its payout every year for at least 25 years. Setting aside the special dividends, though, the payout has been growing since it was $0.10 a share back in 2004.
Costco’s Prospects
Source: rjw1 / Flickr
This dividend payer operates more than 870 membership warehouse locations worldwide that offer branded and private-label products in a wide range of merchandise categories, including groceries, appliances, sporting goods, tires, office supplies, and gasoline. The company was founded in 1976 and is based in Issaquah, Washington. Costco’s closest competitors are Sam’s Club, a subsidiary of Walmart Inc. (NYSE: WMT), and BJ’s Wholesale Club Holdings Inc. (NYSE: BJ). (This is how much money Costco makes every minute.)
The company has undergone a management shakeup, with former CEO Craig Jelinek stepping down at the beginning of this year and being replaced by former Chief Operating Officer Ron Vachris. More recently, Chief Financial Officer Richard Galanti departed and was replaced by Gary Millerchip, former Kroger CFO.
There has also been some speculation that Costco may follow the leads of Walmart and Chipotle by splitting its stock again this year. The company last did so over 24 years ago, and the stock is up about 1,355% since then to around $705 a share.
Costco’s share price increased 44.6% last year and is about 7% higher so far this year. It hit an all-time high of $787.08 last month. That is higher than the consensus price target. However, as mentioned above, the high price target is up at $905, which represents a gain of about 27% in the next 12 months. The consensus recommendation of analysts who follow the stock is to buy shares.
∴
Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
