It isn't surprising that many individuals are interested in how to invest in Costco Wholesale Corporation (COST +0.16%). After all, the company ranks among the biggest wholesale retailers in the world. The stock has also delivered massive gains since it began trading in 1985.
In this article, we'll explain how to buy Costco stock, the pros and cons of investing in the stock, and other key things you need to know about the giant retailer.
NASDAQ: COST
Key Data Points
How to buy Costco stock
You can buy shares of Costco in the same manner as you invest in any stock. Here's a step-by-step guide on how to buy Costco shares.
- Open your brokerage account: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I invest in Costco?
Whether you should invest in Costco stock is ultimately a personal decision. There are two especially important factors to consider before buying this retail stock.
One key consideration is your investing style. Costco isn't viewed as an aggressive growth stock, even though it has performed quite well in recent years.
Another thing to keep in mind is valuation. Costco stock trades at a relatively high forward price-to-earnings ratio. That's typical, though; Costco usually trades at a premium compared to the broader market. Still, investors seeking a bargain might prefer to look elsewhere.
Is Costco profitable?
One thing investors don't have to worry about is Costco's bottom line. The giant discount retailer remains highly profitable.
In its 2024 fiscal year, Costco reported nearly $7.4 billion in net income. Sure, the company's revenue was $254.5 billion, resulting in a net profit margin of only 2.9%. However, low profit margins aren't unusual in Costco's industry.
Revenue
Perhaps most impressive is how Costco's earnings have increased over time. And those higher profits have driven the stock higher, too.
Artificial intelligence (AI) could also help Costco continue improving its bottom line. AI is transforming the retail industry. Global consulting firm McKinsey & Company predicts that generative AI could deliver between $400 billion and $600 billion in additional value to the retail and consumer packaged goods industries.
Costco is already putting AI to work in its operation by using machine learning to track its fresh food and reduce waste.
Does Costco pay a dividend?
Yes, Costco pays a dividend, though its dividend yield of less than 1% isn't very impressive. However, there are other things for investors to like about Costco's dividend program.
The company has increased its dividend for more than 20 consecutive years. Costco has also rewarded investors periodically with special dividends.
Costco should be in good shape to keep its streak of dividend hikes going. The company's dividend payout ratio stands at less than 30%, indicating significant financial flexibility to raise dividends in the future.
Special Dividend
Will Costco's stock split?
Costco's management team hasn't publicly stated that a stock split is being considered. However, it wouldn't be surprising if the company did split its stock in the not-too-distant future.
In January 2000, Costco conducted a 2-for-1 stock split. Its share price prior to the split was a little more than $91. Currently, Costco's share price is several times higher than its price back then. The company also had a 3-for-2 stock split in March 1992 and a 2-for-1 stock split in May 1991.
The bottom line on investing in Costco
It's easy to invest in Costco stock using an online brokerage. The stock has been a big winner over the long run. The chances Costco can keep up its winning ways appear to be good.
FAQs
About the Author
