If one Costco Wholesale observer is correct, investors in the discount retailer could be in for a special delivery.
Baird analyst Peter Benedict, in a research note published Friday, said the chances of Costco (ticker: COST) paying a special dividend “seem to be rising.” The company has paid several special dividends through the years, most recently in 2017.
Costco on Friday reported strong fiscal-fourth quarter earnings of $3.13 a share, up from $2.47 a year earlier. Benedict observed that the discount retailer has “excess cash on the balance sheet and fundamentals remain strong.”
Costco shares were at $340 and change Friday, lower on the day but still up about 16% year to date. The stock has a dividend yield of 0.8%, well below the S&P 500’s 1.7% yield.
Benedict sees Costco paying a special dividend of around $10 a share.
The company last declared a special dividend in 2017, in that case $7 a share. It paid a special dividend of $5 a share in 2015, and one for $7 a share in 2012.
Special dividends were rare even before the pandemic forced many companies to cut their distributions to save cash.
In April, as many companies cut or suspended their dividends due to the pandemic, Costco announced a nearly 8% increase. It boosted its quarterly disbursement to 70 cents a share from 65 cents.
Costco CFO Richard Galanti, who was asked about a special dividend during an earnings conference call nearly a year ago, said: [T]hey are special, and so we’ll have to wait and see what we decide to do in the future.”
Write to Lawrence C. Strauss at lawrence.strauss@barrons.com
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September 26, 2020 at 07:00PM
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Could a Costco Special Dividend Be Coming? One Analyst Thinks Yes, at $10 a Share. - Barron's
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