TLDR:
- Costco increases quarterly dividend by 12% to $1.30 per share
- New annual payout reaches $5.20 per share, payable May 16
- Current dividend yield of 0.54% remains below competitors and industry averages
- Company has raised dividends for 20 consecutive years
- Costco occasionally issues special dividends, including $15 in January 2024
Costco Wholesale announced a 12% increase to its quarterly dividend on Wednesday, bringing the payout to $1.30 per share from the previous $1.16. The move reflects the retail giant’s strong financial position and its commitment to rewarding shareholders.
The new dividend will be paid on May 16 to shareholders of record as of May 2, according to the company’s announcement. This increase brings Costco’s annual dividend payout to $5.20 per share.
Based on recent closing prices, the dividend bump pushes Costco’s yield to approximately 0.54%. While this represents an improvement from the previous yield, it remains below the company’s five-year average of 0.66%.
Costco’s yield also falls short when compared to its competitors in the retail space. The SPDR S&P Retail exchange-traded fund offered a yield of 1.38% in the 2024 calendar year.
Other major retailers maintain higher yields as well. Walmart’s dividend yield was 0.85% in its most recent fiscal year. Target’s yield stood at a much higher 3.3%, while Kroger offered 1.97%.
Dividend Growth History
The wholesale club operator has built an impressive track record of dividend growth. This marks the 20th consecutive year that Costco has raised its payout to shareholders.
Costco’s dividend payout ratio—the proportion of earnings returned to shareholders—sits at 26.3%. This figure is lower than competitors like Walmart (34.5%) and Target (50.4%).
Despite the relatively modest regular dividend, Costco has made a habit of rewarding investors in other ways. The company occasionally issues special dividends following particularly strong financial years.
In January 2024, Costco distributed a special dividend of $15 per share after a standout performance in 2023. The company also paid out a $10 special dividend back in December 2020.
Financial Performance Driving Returns
Costco’s ability to consistently raise dividends stems from its solid financial foundation. The company operates a membership-based business model that generates stable revenue streams.
The retailer continues to expand into new markets while growing its e-commerce presence. These initiatives help ensure steady revenue growth, supporting the company’s ability to increase shareholder returns.
Cost control remains a priority for the wholesale club. This focus helps Costco maintain profit margins and enables it to return value to shareholders through both regular and special dividends.
Investors appear pleased with Costco’s financial management. The stock has shown resilience in a challenging market, rising 5.6% year-to-date while the broader S&P 500 has declined by 10%.
In after-hours trading following the dividend announcement, Costco shares ticked up 0.4% to $971.26.
Wall Street analysts maintain a generally positive outlook on the stock. According to recent reports, Costco has a “Moderate Buy” consensus rating based on 20 Buy recommendations and seven Hold ratings.
The average price target for Costco stands at $1,086.58, suggesting a potential upside of 12.28% from current levels. Over the past six months, shares of the company have gained 9.6%.
For many investors, Costco’s relatively small regular dividend may not be a deterrent. The stock is widely viewed as an attractive long-term holding due to its consistent performance and occasional special payouts.
The company’s board of directors approved the dividend increase against the backdrop of Costco’s continued operational success. The warehouse retailer has managed to maintain growth even as many competitors struggle with inflationary pressures.
Costco’s new quarterly dividend of $1.30 per share will be payable May 16 to shareholders of record at close of business on May 2.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
