Wednesday will be the last day for investors to get in on Costco's (NASDAQ:COST) special dividend of $7 per share. Are you not sure what Costco's special dividend entails? This article is for you.

The raw facts

Costco declared its special dividend on April 25, but it is payable on May 26. For investors to get paid this special dividend, they will need to be shareholders at the close of business on Wednesday, May 10.

Special Dividend Amount $7.00
Record Date 5/10/17
Payment Date 5/26/17
Special Dividend Yield 4%

At $7, Costco's special dividend will provide investors with a 4% dividend yield based on Costco stock's price as of market close on Tuesday. However, since special dividends are irregular, sometimes stock prices fall slightly after the record date has passed. So investors who own Costco stock before the market closes on Wednesday shouldn't count on a 4% total return between now and when Costco pays out the dividend on May 26. While the $7 dividend will surely be paid, a subsequent pullback in the stock price could offset some of the benefits of a dividend payment.

Costco CFO Richard Galanti commented on the special dividend in a press release:

Today's announcement of a $7.00 special dividend is our latest step in returning capital to our shareholders. Our strong balance sheet and favorable access to the credit markets allow us to provide shareholders with this dividend, while preserving financial and operational flexibility to continue to grow our business globally.

This isn't Costco's first special dividend

Investors should note that Costco's special dividend isn't necessarily that irregular. The company has paid out two other special dividends in recent years. In May 2015, Costco paid out a $5 special dividend. And in December 2012, the company offered a $7 special dividend. So it could be said that long-term shareholders are coming to expect a special dividend from Costco every few years. Indeed, The Motley Fool's own Jeremy Bowman predicted late last year that Costco was likely to announce a special dividend soon.

Roll of money next to a sign saying, "dividends."

Image source: Getty Images.

Costco also increased its regular dividend

In addition to its announcement about a $7 special dividend, Costco said in the same press release that it is increasing its quarterly cash dividend by about 11%, from $0.45 to $0.50. This regular quarterly dividend gives Costco stock about a 1.2% dividend yield at today's price for the stock. And this, of course, excludes the benefits of Costco's upcoming special dividend.

Including this $0.05 dividend boost, Costco's regular dividend has increased at an average rate of about 12.7% annually over the past five years.

Investors should be sure to give proper weight to Costco's special dividends when evaluating the stock as a potential investment to generate income. Now that Costco has announced three sizable special dividends since 2012, the pattern is significant enough for dividend investors to consider these special dividends in their forecasts for income from the stock. In other words, Costco's 1.2% dividend yield for its regular dividend arguably understates the company's generous dividend policies.