Costco Is a Dividend Stalwart. Should You Add It to Your Portfolio?

Core Insights - Costco's dividend has consistently increased since its introduction in 2004, with a recent special dividend of $15 per share in January 2024 [1] - The current dividend payout is$4.64 per share, supported by strong free cash flow of approximately $2.2 billion in Q1 fiscal 2025 [3] - Despite the consistent dividend growth, the yield is only 0.4$19.50 per share in total dividend income, but the yield remains below 1.9% when considering the current share price [4] - The company has a history of increasing dividends, having raised its payout for 21 consecutive years [10] Stock Performance - Costco's stock price increased over 40% last year, outperforming the S&P 500 [6] - The company operates 890 warehouses globally, with plans to open 29 more in fiscal 2025 and a renewal rate of 91% [7] - Fiscal 2024 net income reached $7.4 billion, a 17% increase year-over-year, with profits rising 13% in Q1 fiscal 2025 [8] Valuation Concerns - The current P/E ratio is at an all-time high of 62, raising concerns about valuation sustainability [8][12] - Analysts forecast only 13% annual profit growth for fiscal 2025, which may not justify the high earnings multiple [9] - The low dividend yield and high valuation suggest that investors may find better returns in other retail stocks [12]