What happened
Shares of Costco Wholesale (COST 0.65%) were moving higher on a down day for the market after the warehouse retailer surprised investors with a dividend hike last night.
As of 12:28 p.m. ET, the stock was up 2.6% on the news.
Image source: Costco.
So what
In a press release last night, the retail giant said it was raising its quarterly dividend from $0.90 a share to $1.02 a share, an increase of 13%.
With the increase, Costco still offers just a modest dividend yield of 0.8%, but the company has now raised its dividend every year since 2004, a streak of 20 years, and it's almost always rewarded investors with a double-digit hike.
The company also has a history of handing out generous special dividends, usually about every two-and-a-half years. It hasn't given any indication that it would pay another one, but investors are due for one based on the historical cadence.
Now what
Costco disappointed investors with a weak monthly comparable sales report earlier in April, but the dividend hike offers some reassurance that it's business as usual for management.
Investors should also be mindful that Costco makes a majority of its profits from its membership income, meaning comparable sales growth isn't as important for it as it is for other retailers.
Costco still needs to retain and grow its membership base, but the company's reputation for bargain prices, its membership income stream, and its strength in selling groceries make it more recession-resistant than most retailers.
The company should be able to manage through whatever headwinds the economy throws at it.
