This article is part of our Rising Stars Portfolio series.
Last December, I bought shares of Costco
Some people perceive dividends as votes of confidence. One writer for Investors Business Daily recently interpreted "bold" dividend hikes from the likes of Wynn Resorts
In years past, now-bankrupt Borders paid a dividend, even with its finances on the brink of ruin. And plenty of the financial companies that received TARP funds were required to suspend their own dividends. In March, the Federal Reserve even rejected Bank of America's
Of course, one could make a similar argument about Costco, which also hit a new 52-week high yesterday, amounting to a 16% return since I bought it for my Rising Star portfolio. That new infusion of bullishness likely related to its 17% dividend boost, to a quarterly $0.24 per share, and the approval of a new $4 billion share buyback program. Still, Costco's debt-to-capital ratio is a far more manageable 15%, and its business has been firing on all cylinders lately.
Regardless, I don't love Costco because it pays a growing dividend. I admire it as a best-in-class company with a solid management team that's building a long-term business. Costco's increased dividend is great news, and it certainly gives stockholders even more reason to love the stock. However, I'm even happier about the positive dividend I get from knowing that by investing in Costco, I own a piece of a truly great business.
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