Actionable news
All posts from Actionable news
Actionable news in COST: Costco Wholesale Corporation,

No Deals At Costco Wholesale Corporation


Costco Wholesale is a Dividend Contender with 13 consecutive years of dividend growth.

Costco's consistent growth has been a boon for investors and speaks to the quality of the business model.

Valuation concerns keep me from adding shares of Costco to my portfolio.

Based on a discounted cash flow analysis shares are overvalued by nearly 20%.

Costco would need to decline to the mid-$140's before becoming an investment candidate.

My wife and I became members of Costco Wholesale Corporation (NASDAQ:COST) earlier this year and the warehouse really is fantastic. We've been to the store closest to us a few times over the past few months and compared to some of the other large retailers in our area I have to say that Costco is by and far the best one to visit.

I've long heard of Costco's merits from shoppers and investors alike. Now that I've had the Costco experience first hand it's time to investigate the company as an investment.

How about that dividend?

As a dividend growth investor one of the first things I examine is whether a company has consistently paid and grown their dividend payout.

Costco has increased the dividend payout for 13 consecutive years giving them the title of Dividend Contender. There's plenty of other companies that have streaks longer than Costco; however, a journey of a thousand miles begins with one step...or in Costco's case 13.

The following chart shows the quarterly dividend payment from Costco since initiating a dividend in 2004.

*Note: Costco has also paid 2 special dividends. (1) $7.00 per share in December 2012 and (2) $5.00 in February 2015.

The quarterly payout has increased by a factor of 4.5 since the first payout was made in 2004. The following chart shows the 1-year, 3-year, 5-year and 10-year dividend growth rates for Costco.

The consistency in the dividend increases is remarkable. The lowest dividend growth rate still comes in at 10.6%.

The payout ratio, both off earnings and free cash flow, has been increasing over time as well. Although the payout ratios have only slightly increased as both earnings and free cash flow have had tremendous growth in their own right.

Costco's management clearly has a history of being shareholder friendly and allowing owners to participate in the growth of the company through higher dividends.

Historic Metrics

The next step I go through is to see how the company has been able to grow their dividends year after year. Over the long term that's only possible if the company is growing the right way.

Costco's revenue has more than doubled in just 11 years. Costco is at the enviable position of growing store counts and growing sales at their existing...