Costco Wholesale (COST +0.01%) stock has delivered exceptional returns to shareholders over the years. However, its rising share price has brought the stock's dividend yield to its lowest level in over 15 years. Here's how much Costco pays in dividends.
Improving sales should keep Costco's dividend growing
As inflation levels off, Costco is seeing stronger discretionary spending in areas like toys, tires, gardening, and health and beauty. Comparable sales, excluding gas prices and foreign currency, were up 7.2% year over year in the four weeks ended Aug. 4, noticeably higher than the 5.8% comps growth for the 48-week period ended on the same date. Such growth should support Costco's rising dividend as well.
Costco raised its dividend earlier this year by 14%, bringing the quarterly payout to $1.16 per share, good for a forward dividend yield of 0.52%. That's below the S&P 500's yield of 1.32%, but at the current rate of growth, Costco's dividend could nearly double in five years.
NASDAQ: COST
Key Data Points
For fiscal 2024 (which ended in August), analysts are expecting the company to report earnings per share of $16.34, so Costco is currently paying out an estimated 28% of its annual earnings as dividends. This is a healthy payout ratio, leaving the company with substantial cash to reinvest profits to expand the business over the long term.
There are a lot of reasons to like Costco's prospects and dividend growth potential. The company still has enormous opportunities to grow its e-commerce business and expand internationally, which should allow earnings to continue rising at double-digit annual rates in the coming years.
It's also worth noting that Costco pays shareholders a special dividend every three years or so. It paid a one-time dividend of $15 per share in January, so when you average that out over a three-year period, the stock's yield is closer to 1%.
