Is Costco Wholesale Corporation A Good Buy For Dividend Investors?

Costco Wholesale Corporation COST is among the best-performing dividend stocks so far in 2024, with recent analyst price targets implying further upside. The stock has gained a whopping 59% in the last year, more than double the gains made by the S&P 500. Costco Wholesale has recorded 24.5% gains year to date, rising from $650 to over $800, and outperforming the broader indices.

Analysts rate Costco Wholesale as financially healthy, with GuruFocus giving it a Financial Strength Rank of 8. GuruFocus is a popular stock market research platform that determines a company’s financial strength by analyzing its debt burden, debt-to-revenue ratio and Altman Z score. The Altman Z score is a model created by American Finance Professor Edward Altman to predict the likelihood of a company going bust in the next 2 years. A GuruFocus Financial Strength Rank of 6 and above indicates a strong balance sheet and the ability to withstand headwinds.

Costco Wholesale has paid consistent quarterly dividends to its shareholders for the last 19 years. While its yields are not that high, it has maintained an impressive annual dividend growth rate of 12% for the last 10 years. The company is currently paying its shareholders a quarterly dividend of $1.15 and a forward yield of 0.59%. Costco Wholesale has a dividend payout ratio of 27.05%, which shows its heavy investment in growth. The retailer is planning to open 31 new stores in the US and also expand its business in China.

Costco Wholesale’s success is a result of its unique business model, which creates customer loyalty through membership clubs. Shoppers are required to pay a membership fee to enjoy its low-cost prices. The retailer collected a staggering $4.5 billion in membership fees in 2023 alone.

For long-term investors seeking a growth stock with a stellar dividend payment history, Costco Wholesale could be a great buy today.

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