Retail giant Costco pays special dividend | Finance | Finance

Costco is a globally respected retail giant that has consistently delivered strong financial results and maintained a loyal customer base. Business has boomed in recent years, making Costco one of the most successful retailers in the world . The company's unique business model of offering annual memberships in exchange for access to wholesale items at the lowest prices in the industry has attracted shoppers worldwide.

On December 11, 2023, Costco announced strong results for the first quarter of fiscal 2024. Total revenue was $242.29 billion, up 6.76% year over year and 47.14% quarter over quarter. Net income was $6.29 billion, up 7.67% year over year and steady from the previous quarter. Earnings per share stood at $14.16, up 7.74% year over year and up 65.86% quarter over quarter.

Unlike many of its peers, Costco operates with a significant amount of net cash. This means that the company has extremely low interest expenses, which helps it maintain a low cost structure, which it then passes on to its members.

At the end of the first quarter of fiscal 2024, retail giant Costco had about $7 billion in debt and nearly $18 billion in cash, cash equivalents, and short-term investments. So the company has plenty of cash to keep its operations running.

Notably, Costco also offers a growing quarterly dividend of $1.02 per share. The company’s last quarterly dividend increase was a double-digit 12% increase. This, along with the special dividend, helps support the company’s high stock valuation. COST stock has gained 45.35% year to date in 2023, easily beating the S&P 500’s 23.41% gain.

Truist Financial raised its price target on shares of Costco from $619 to $693 and maintained a “buy” rating on the stock in a research report on December 15. The company reported “solid” sales growth that continues to be driven by lower-margin consumables. However, Costco’s pricing model allows the company to maintain high margins.

Costco's warehouses are fun to shop in. Customers pay an annual membership fee for steep discounts, which helps drive much of the company's operating profit. Warehouses are stacked to the ceiling with massive amounts of merchandise, but Costco is good at buying only what it knows will sell. Costco's inventory turnover ratio—a measure of how many times the company sells and replaces inventory over a given period—is much higher than other leading retailers.

Costco generates very low sales margins, making high inventory turnover essential to the company's success. Over the past 10 years, Costco has grown its earnings per share at an above-average rate of 11.8% per year.

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