Is Costco A Good Dividend Stock

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Is Costco A Good Dividend Stock

Is Costco A Good Dividend Stock?

Costco is a blue-chip company and one of the few retail giants. In fact, it is the 3rd largest retailer in the entire world, which shows it has a massive footprint.

Costco's recent reports also show that net sales increased 13% y/y in April and reached $24 billion. As for the comparable sales, they are up by 11.6%. These are strong numbers, even if we strip out the FX swings and high energy costs.

Costco's Income Growth Remains Strong

When we zoom out, the growth trajectory of Costco also remains strong. In fact, the net income is also up by 14% y/y and was recorded at $2.04 billion in FY Q2.

The membership fee also jumped 13.6% during the quarter, while the executive memberships have grown by 9.5%. According to analysts, one reason why Costco continues to pay a dividend is that it gets recurring revenue from membership fees.

Costco has also recently announced a 13% increase in its dividend payment. This means the new dividend amount is now $1.47 while the earlier one was $1.30.

This hike marks yet another big milestone for Costco. The company has been raising its dividend for 22 years in a row! They also pay special dividends every 3-5 years, which is yet another plus point for the investors.

But, this doesn't mean the Costco stock doesn't have any risks. The Costco stock is trading at a forward P/E of 47, and its membership renewal rate is down from 90.5% to 89.7%.

There's no doubt that the valuation of Costco is a little high. On top of that, the yield is tiny when compared to other dividend stocks.

But for those investors who want to invest for the long-term and also want dividends, then Costco can be a good choice. Although Costco's dividend yield is tiny, it is a good defensive stock, and that makes it a good option in today's environment.

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