3 Things to Know About Costco Stock Before You Buy

Core Insights - Costco Wholesale has shown impressive earnings growth, with revenue and net income increasing even during challenging times, such as the early pandemic, leading to a nearly 200% stock price increase over the past five years and over 30% in 2024 [1] Group 1: Valuation - Costco's high forward price-to-earnings (P/E) ratio of about 49 times is significantly higher than competitors like Walmart and Target, which may initially seem expensive [2] - The company's unique warehouse model allows it to generate most profits through membership fees, providing a steady income stream before any sales occur, and enabling it to offer low prices on essential goods [3] - Costco's membership renewal rates have consistently remained above 90%, indicating a reliable source of profit and justifying its premium valuation [3] Group 2: Stock Split Potential - The high share price, currently over $800, may limit access for smaller investors, potentially prompting Costco to consider a stock split to make shares more accessible [4] - A stock split would not change the company's fundamentals or market cap but could increase demand for shares, positively impacting their price [4] - Costco has not split its stock in 24 years, but the significant price increase from about$500 to over $800 in the past two years suggests that now may be an opportune time for such a move [5] Group 3: Dividend Profile - Costco's regular dividend yield is approximately 0.5$4.64 per share [6] - The company has a history of issuing special dividends, with past payouts ranging from $5 to$15 per share, including a recent total payment of $6.7 billion announced in December [6] - While future special dividends cannot be guaranteed, Costco's history suggests a likelihood of continued special payouts, alongside growing regular dividends [7]