Have you seen what’s been happening with Costco Wholesale Corporation? This high-flying retailer is making big waves in the investing world. Why? Well, they just announced a special dividend that’s got everyone buzzing. If you’ve been on the fence about whether to invest in Costco or not, now might be the perfect time. Let’s dive into what’s happening.
First off, for those not in the know, Costco is definitely not your average stock. It’s been trending at all-time highs and may not seem cheap, but the Q1 results, cash flow, balance sheet, and, most importantly, the special dividend suggest that it can go much higher. The company is known as the premium stock in retail and membership clubs, and, more importantly, it’s being hailed as the premium producer of cash flow and free cash flow. Yes, you heard that right. All these factors together make it worth considering, even at its current high pricing.
Is your interest piqued yet? Here’s more. Costco has been piling up cash for the last couple of years. They went ahead and announced their last special dividend in Q4 2021. This time, the payment amounts to $15 per share for investors, which translates to a neat little 2.25% return with the shares trading near $650. Here’s the real kicker: The ex-dividend data isn’t coming out until December 27. That means the stock will likely move up between now and then and could easily reach $675.
The Big Takeaways
- Costco’s stock is climbing after announcing a special dividend.
- The company’s financial position suggests it could offer another special dividend in the next two to three years.
- Analysts believe their targets will push this stock to new record levels by 2024.
Now, let’s be real for a second. Coastal is spending a pretty penny by offering $15 per share. But the company can afford it. They’re sitting on a cash pile of $17 billion, more than enough to cover this $6.7 billion special payment. And the best part? They’re still in solid financial standing after paying it!
This year’s cash stash increased by 24% compared to last year. And if their operational strength continues to hold strong, they’re projected to see another year of robust cash flow in 2024. That’s why we said another special payment could be on the horizon in a few years.
Costco Shining in the Margins
Aside from dividends, let’s talk about their quarterly performance. Costco had a solid quarter, with revenue growing 6.2% to a staggering $57.8 billion. True, this revenue aligned with expectations, which might not seem impressive. But the company’s wider-than-expected margin and membership growth are balancing it out brilliantly. Plus, the firm’s digital sales are back in the growth game with a noteworthy growth of 6.1% adjusted.
Membership fees, which often hint at future sales, grew by 8%. And there are no signs of fee hikes, which is another point scoring in favor of the company. Plus, the company’s margins are deepening at the gross and operating levels, leading to a 16% increase in net income and earnings. Earnings of $3.58 also beat the Marketbeat.com consensus by 16 cents and may even lead to upward revisions for the 2024 outlook.
The Analysts’ Stance On Costco
What’s the word on the street, you ask? Well, analysts are bullish on Costco stock. They’re seeing it as a driving force of the recent uptrend in share prices. In fact, the 25 analysts tracked by Marketbeat.com rate it as a “moderate-buy.” Not just that, their target is an increase compared to last month, last quarter, and last year. One of the first new targets to appear after the Q4 release was a price target increase from Telsey Advisory Group to $700, implying a further 7.75% upside for this stock.
Bottom line: keep your eyes on the price action in Costco. With the Q4 news, it’s heading upward, and the market momentum looks strong. The analysts’ sentiments back this view, making it a promising prospect for investors’ portfolios. Few companies can match these strong fundamentals, making Costco a special investment indeed.