April 11, 2025 a 03:31 am
COST: Dividend Analysis - Costco Wholesale Corporation
The analysis of Costco's dividend profile reveals a mixed outlook. With a modest dividend yield of 0.44%, investors may find the yield less attractive compared to peers. However, Costco's commitment to maintaining a 22-year dividend history and the lack of recent cuts or suspensions suggest strong stability and consistency. Yet, the company's high payout ratios could pose sustainability challenges in the future.
📊 Overview
In the cyclical Consumer Discretionary sector, Costco provides a dependable dividend profile despite its modest yield.
| Metric | Details |
|---|---|
| Sector | Consumer Discretionary |
| Dividend yield | 0.44% |
| Current dividend per share | 20.37 USD |
| Dividend history | 22 years |
| Last cut or suspension | None |
🗣️ Dividend History
Costco's uninterrupted dividend payments over 22 years illustrate its reliable payout strategy, vital for income-focused investors. Their consistency enhances investor confidence despite fluctuating dividend per share figures.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 1.16 |
| 2024 | 4.50 |
| 2023 | 18.96 |
| 2022 | 3.49 |
| 2021 | 3.07 |
📈 Dividend Growth
The growth rates over the past 3 and 5 years indicate a positive yet uneven trajectory, crucial for assessing long-term income potential.
| Time | Growth |
|---|---|
| 3 years | 13.59% |
| 5 years | 12.30% |
The average dividend growth is 12.30% over 5 years. This shows moderate but steady dividend growth.
✅ Payout Ratio
High payout ratios, exceeding 100%, could constrain Costco's future dividend increases, highlighting cash flow sustainability issues.
| Key figure | Ratio |
|---|---|
| EPS-based | 118.65% |
| Free cash flow-based | 130.49% |
The EPS payout ratio of 118.65% and FCF payout ratio of 130.49% exceed typical sustainability thresholds, indicating potential financial strain if earnings do not grow proportionately.
🔍 Cashflow & Capital Efficiency
Costco's capital utilization metrics indicate operational efficiency, though its cash flow yields may not fully support high payout ratios.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 1.67% | 2.79% | 1.49% |
| Earnings Yield | 1.86% | 2.60% | 2.48% |
| CAPEX to Operating Cash Flow | 42.12% | 39.06% | 52.64% |
| Stock-based Compensation to Revenue | 0.32% | 0.32% | 0.32% |
| Free Cash Flow / Operating Cash Flow Ratio | 58.46% | 60.94% | 47.36% |
Costco's cash flows are under pressure to meet its equity and free cash flow payouts, necessitating efficient capital allocation for continued growth.
⚖️ Balance Sheet & Leverage Analysis
The company's leverage ratios point to stable, yet cautiously high debt positions, balancing financial flexibility with risk.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 35.02% | 35.45% | 43.79% |
| Debt-to-Assets | 11.85% | 12.88% | 14.09% |
| Debt-to-Capital | 25.94% | 26.17% | 30.45% |
| Net Debt to EBITDA | -0.13 | -0.43 | -0.11 |
| Current Ratio | 0.97 | 1.07 | 1.02 |
| Quick Ratio | 0.44 | 0.57 | 0.46 |
| Financial Leverage | 2.95 | 2.75 | 3.11 |
With relatively conservative debt metrics and a consistently managed current ratio, Costco sustains adequate liquidity to cover obligations.
🏦 Fundamental Strength & Profitability
Costco's profitability ratios reflect a robust capacity to generate earnings, supporting its dividend payouts.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 31.19% | 25.11% | 28.31% |
| Return on Assets | 10.55% | 9.12% | 9.11% |
| Return on Invested Capital | 20.37% | 16.48% | 18.24% |
| Net Profit Margin | 2.90% | 2.60% | 2.57% |
| EBIT Margin | 3.89% | 3.57% | 3.52% |
| EBITDA Margin | 4.77% | 4.60% | 4.53% |
| Gross Margin | 12.61% | 12.26% | 12.14% |
| R&D to Revenue | 0% | 0% | 0% |
With consistent returns across key profitability metrics, Costco's financial health strongly underpins its dividends, though attention to margins is advisable.
📉 Price Development
🔢 Dividend Scoring System
| Criteria | Score | Rating |
|---|---|---|
| Dividend yield | 1 | |
| Dividend Stability | 5 | |
| Dividend growth | 4 | |
| Payout ratio | 2 | |
| Financial stability | 4 | |
| Dividend continuity | 5 | |
| Cashflow Coverage | 3 | |
| Balance Sheet Quality | 4 |
Overall Score: 28 out of 40
📝 Rating
Costco's dividend profile is characterized by exemplary stability and continuity, offering reliability for income-seeking investors. However, the low yield and high payout ratios necessitate attention to sustainability, particularly if earnings growth does not align. Overall, Costco is a suitable investment for those valuing dividend security, albeit with moderated yield expectations.