Costco Dividend: Buy By This Powerful Deadline

Costco is known as a destination for Americans looking to save money on everything from TV dinners to TVs. But what about actually making money? The warehouse club is doling out a quarterly dividend of $1.47 per share next month. Is it worth it to buy the stock?

Despite sticky inflation and a downbeat consumer, Costco reported earnings per share of $6.75 in its most recent quarterly report released last month. This beat Wall Street’s expectation of $6.54 per share. The retailer said it would issue dividends next month; investors who own the stock as of Oct. 30 are eligible.

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Wall Street pros say that Costco’s wide array of bargains and member benefits, including pricey purchases like electronic equipment and cruise packages, appeal to higher-income shoppers as well as families who stretch tight budgets by buying in bulk.

“Costco has benefited from being more exposed to the higher-end consumer than a lot of the big-box retailers,” says Keith Buchanan, senior portfolio manager and partner at Globalt Investments.

Costco, like other stocks that depend on consumer spending, is vulnerable to the impact of slowing wage growth that hasn’t kept up with persistent inflation. But compared to its big-box retail brethren, Costco has an additional revenue stream in its membership fees, Buchanan notes.

“The last time they took membership rates higher, the street was surprised at how little attrition there was,” he tells Money. Investors are likely to assume that if sales contract, raising the cost of membership could provide a bulwark against eroding profits.

So should you buy Costco stock before Oct. 30?

Not everyone thinks Costco stock at its current valuation is worth it. “A great company is not automatically a great stock at any price,” Gavin Magor, director of research and ratings at Weiss Ratings, wrote in a recent research note. Weiss currently has a “hold” rating on the stock.

“Paid membership growth has now slowed for eight straight quarters. Paying a premium multiple for steadiness leaves little room for disappointment,” Magor wrote.

So the answer to whether or not you should buy Costco stock depends — like so many other investing decisions — on whether the retailer is a good fit for your long-term investing goals and risk profile, according to Arun Sundaram, senior vice president of investment strategy at CFRA Research.

“For many older investors that are closer to retirement and want more predictable cash flow… dividend-paying stocks are more attractive” than stocks that can grow faster but are more volatile, like tech stocks, he says. And you can’t realize those gains until you sell the stock — another reason why investors who depend on their investment portfolio for income prefer dividend-producing stocks.

At a current share price of roughly $990, next month’s dividend amounts to a dividend yield of just 0.6%. Other consumer stocks have had higher recent dividend yields. For instance, PepsiCo’s annual dividend yield is nearly 4.5%, and Clorox is close to 6%.

But Costco has also distributed more generous one-off dividends after extremely good quarters, such as a $15 payout in January 2024 and a $10 payout in December 2020. For this reason, some experts suggest that investors might want to give Costco a second look right now.

“A lot of investors look forward to that special cash dividend. Right now it looks pretty imminent, in our view,” Sundaram says.

“Costco tends to pay out these cash dividends once their cash balance starts to inflate a bit,” he tells Money. “If you look at their cash and cash equivalents balance, it’s at $21.3 billion, and the last time they paid, that same balance was $17.9 billion,” he says. “We’re past that previous threshold,” which might be an indication that the next super-sized dividend could be announced within the next year.

Investing pros care more about a company’s fundamentals, especially if they plan to buy and hold, than the particular date of issuance. “We don’t look at the timing of it,” Buchanan says.

But if you had buying Costco stock on your to-do list anyway, then, sure, get that trade in by Oct. 30 and you can get a payout roughly equivalent to the chain’s famous hot-dog-and-soda combo.

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