Despite Costco’s stock falling about 3% after its latest earnings report, analysts believe a special dividend could be imminent. The company’s Q3 revenue beat expectations, and EPS matched estimates, but the market’s reaction was negative.
Analysts from Bernstein and Bank of America are anticipating a special dividend payout due to Costco’s strong cash position and historical dividend patterns, which could drive a stock rally.
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Investors reacted negatively to Costco's latest financial report, with shares of the warehouse club falling approximately 3% in early trading on Friday. However, despite the initial downturn, a potential special dividend on the horizon could offer a significant boost to shareholders.
Costco's fiscal third-quarter revenue surpassed expectations, and its earnings per share (EPS) met the consensus estimate from LSEG. Yet, the market's reaction was muted, leading to the stock's decline.
Analysts at Bernstein and Bank of America are optimistic about the possibility of a special dividend. Zhihan Ma, an analyst at Bernstein, noted in a Friday report, "Given its strong cash position, we wouldn't be surprised to see a special dividend." This sentiment is echoed by Christopher Nardone at Bank of America, who anticipates an announcement in the coming months. "COST's last special dividend was paid in Jan. '24, and the company has historically distributed special dividends every 2-3 years," Nardone stated in a Thursday note. "We think an announcement could come over the next few [quarters] given COST's healthy cash balance."
Historically, Costco has distributed special dividends every two to three years. The previous special dividend in January 2024 was $15 per share. Nardone calculated that to maintain a similar yield of approximately 2.4% at the current stock price, the payout would need to be around $24 per share.
Previous special dividends include:
- January 2024: $15 per share
- December 2020: $10 per share
- May 2017: $7 per share
- February 2015: $5 per share
- December 2012: $7 per share
In the interim, Costco shareholders continue to receive a regular quarterly dividend, which currently yields 0.59%. The stock has performed well year-to-date, with a 15% increase.
