There's a lot for investors to like when considering Costco (COST -1.04%) and Walmart (WMT -1.18%). The two chains offer consumer staples and other household items, typically at more attractive price points than rival retailers. That's great when the going is good. It's a comfort when things aren't going so well.
They are also steady generators of dividend income, with impressive streaks of annual hikes. Costco has boosted its distributions 22 times since initiating a quarterly payout policy. Walmart is in elite company as a Dividend King, among dozens that have delivered at least 50 years of annual hikes. Earlier this year, it stretched its run of increases to 53 consecutive years. Which is the smarter dividend growth stock for the rest of this year? Let's take a closer look at these two all-weather winners.
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The case for Walmart
The retail empire that Sam Walton built up from a modest five-and-dime store in Arkansas has come a long way. Walmart was the country's largest company by trailing annual revenue for 13 consecutive years, before being passed by Amazon earlier this year.
Growth has been slow but consistent. It has posted just one fiscal year of declining revenue, and even that rare stumble -- in 2015 -- was a mere 0.6% dip on the top line. However, you have to go back 20 years to find the last time that Walmart posted double-digit revenue growth.
Walmart remains a staple for roughly 40 million shoppers on any given day. With more than $735 billion in trailing sales, it's a retail juggernaut with recession-resistant appeal.
NASDAQ: WMT
Key Data Points
The case for Costco
It might seem odd that you have to pay an annual membership fee to get more bang for your buck, but that's Costco. The warehouse club operator is a bellwether, a bastion of deep values on bulk-packaged products. Walmart's Sam's Club is a player in this space, but no one can touch Costco stock with its 924 big-box stores overflowing with customers.
Like Walmart, Costco has delivered positive net sales growth in 32 of the past 33 years. Both can confidently be added to the short list of safe stocks. They both offset their meager markups with high product turnover volume.
NASDAQ: COST
Key Data Points
The final verdict
Like most stocks that have delivered generational worth, Walmart and Costco have had gains that outpace their growth and dividend hikes. You're not buying either one as a source of income. Walmart yields less than 1%. Costco is even lower -- at 0.6% -- but beefy one-time distributions every two or three years pack a punch of passive income.
Neither stock is cheap on an earnings basis. Costco and Walmart are trading at 47 and 37 times trailing net income, respectively. Costco has the higher valuation, but it's earned. It's growing faster than Walmart. In the latest quarter, Costco's net sales rose 9%, fueled by a 7.9% surge in comps. Walmart's revenue rose 6% with a 3.1% increase in comps for its stateside namesake stores.
Both companies are iconic with healthy moats in the otherwise cutthroat retail space. They have had an off-year. Walmart is up just 7% over the past year. Costco is down 2%. This isn't a problem. It's an opportunity. I'm going with Costco as the smarter buy heading into the four final months of 2026. It has stronger sales momentum and, frankly, a more differentiated platform and market advantage. It's time to go shopping.
