Costco Stock: Buy, Sell, or Hold? The Motley Fool

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Costco Wholesale (COST) beat expectations for the company’s Q1 earnings late Thursday and the retailer’s board declared a special dividend. Costco stock surged to new highs Friday after pulling back during Thursday’s regular session. The company has increased its dividend for 19 consecutive years. Over the last 10 years, Costco’s dividend has more than tripled. It has also rewarded investors periodically with special dividends.

  1. In 2022, Costco reported more than $5.8 billion in net income.
  2. Sales were up an impressive 9% year over year in December, more than double the expansion rate from the prior quarter, executives said in early January.
  3. The world’s second-largest economy has “very good potential” for Costco expansion, CFO Rich Galanti told CNBC.
  4. And those higher profits have driven the stock higher, too.

Investors should follow this metric, in addition to the chain’s updated renewal rate, in Costco’s next full earnings update. Continued boosts in both areas will mean faster sales growth and more cash returns to shareholders over the long term, even if 2024 is a muted year in both respects. Costco does tend to earn its premium valuation, thanks to factors like its unusually stable sales and earnings growth. Profit margins are low, sure, but they don’t swing wildly along with consumer spending shifts.

Over the past three years, the company’s dividend has grown by an average of 12.92% per year. Sales were up an impressive 9% year over year in December, more than double the expansion rate from the prior quarter, executives said in early January. Costco https://bigbostrade.com/ Wholesale Corp. bonds have been seeing bullish activity recently, according to information from the market-data company BondCliQ. Retail giant Costco Wholesale is reportedly testing out a way to make sure its customers maintain their elite status.

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Despite rising interest rates and inflation, consumer spending stayed strong in 2023. Additionally, in 2023 the company ventured into China for the first time and has already expanded to five stores in the country. Despite operating in 14 countries, Costco continues to have significant growth potential abroad. In six of those countries, the company has five or fewer locations, indicating almost endless expansion possibilities within those regions and new ones.

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. It isn’t surprising in the least that many individuals would be interested in how to invest in Costco Wholesale Corporation (COST -0.84%). 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 terms of scale, it is the largest retailer of choice and prime beef, organic foods and rotisserie chickens. Rotisserie chickens are a long-standing tradition at Costco which pioneered their use. The chickens are sold for less than cost and used to attract business into the store. It owned 206 stores and was called PriceCostco for a time.

News

The Price family eventually exit the business in favor of new operations resulting in the rebranding to Costco Wholesale Corporation. The Price family’s new business is called PriceSmart and operates a chain of membership clubs in the Caribbean and Central America. Price Club’s first store, opened in an old Howard Hughes airplane hangar, is still in operation and known as Costco #401. First-quarter net income jumped 16% year over year to $1.59 billion, and Costco’s profits have been on a steady uptrend for the last 10 years.

Valuation

Management has made it clear over the years that they intend to direct all extra resources toward keeping the chain’s product prices low. That’s why operating profit margin hasn’t budged from about 3% of sales in the past decade. The main piece of good news driving shares higher into 2024 is Costco’s improving growth rates. Costco’s board of directors also declared a special cash dividend of $15 per share to investors holding COST stock as of Dec. 28, 2023. The dividend will be paid on Jan. 12 with a total payment amount around $6.7 billion. Furthermore, Zaman asserted that Costco proves “a brick-and-mortar retailer can not only survive but also thrive” despite e-commerce trends.

Sales & Book Value

The company last increased its membership fees in June 2017. “You’ll see it happen at some point. We can’t really tell you if it’s in our plans or not.” The retailer reported a 16.6% increase in earnings to $3.58 per share on 6.2% revenue growth to $57.8 billion in revenue. FactSet analysts expected 11% earnings growth to $3.41 per share on $57.79 billion in revenue. But investors shouldn’t count on Costco’s profit margin rising along with those fees.

According to 25 analysts, the average rating for COST stock is “Buy.” The 12-month stock price forecast is $629.17, which is a decrease of -9.46% from the latest price. The company is on a path to continue seeing significant financial gains year over year as it grows its international footprint. This is positive que es scalping for America’s retail sector generally, and certainly bodes well for Costco. Indeed, amid this retail-bullish backdrop, one market commentator emphasized Costco’s prime position as a U.S. retailer with an ultra-loyal customer base. Costco Wholesale has increased its dividend for the past 20 consecutive years.

The 2020 special dividend was the second-highest at $10 per share. Being a Costco investor pays you every quarter in the form of dividend distributions. Moreover, a Costco stock analysis shows that it has gained significant value over the years. In other words, history indicates that it pays to be a Costco shareholder. It’s that loyalty, by the way, that makes Costco stock a recession-resistant asset.

Customers have ample motivation to shop at Costco to get the best return on investment for their annual fees. Costco isn’t viewed as an aggressive growth stock, even though it has performed quite well in recent years. 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. It was among the very first warehouse membership clubs and targeted small merchants and businesses. The Price family turned down an offer to merge with Walmart’s Sam’s Club in favor of a more suitable match-up with Costco. Coincidentally, Costco founder Jim Sinegal got his start in the retail business working for Sol Price at his original membership club, FedMart.