What is the Estimated Dividend Payment by Costco in 2025?
What is the Estimated Dividend Payment by Costco in 2025?
Many individuals overlook Costco Wholesale's (COST, 0.56%) dividends. For years, it's been a growth stock, appreciating by an impressive 585% over the past decade (up to Nov. 7). In comparison, the S&P 500 only managed a 195% increase during the same period.
Interestingly, Costco has been offering dividends for over two decades now, and the board of directors has a consistent record of annual increases. Therefore, it's crucial to predict the amount they'll distribute next year and evaluate if they can maintain the payouts.
Crunching the Numbers
Costco declared a staggering $8.6 billion in dividends during its latest fiscal year, which concluded on Sept. 1. However, this figure incorporates an extraordinary $6.7 billion special dividend ($15 per share) issued in January. This special dividend is not an annual event, meaning it's unlikely to recur in the forthcoming year.
As of Oct. 1, Costco had approximately 443.1 million shares in its cap. The company currently pays out a quarterly dividend of $1.16 per share. Calculating these figures, you get around $2.1 billion annually. Due to the board's tradition of raising dividends in May, this amount is likely to increase.
In the past year, Costco boosted the dividend by 13.7%. Assuming a 10% rise, the new quarterly payout would swell to $1.28. Consequently, the total annual dividends would total around $2.2 billion.
Costco produces ample free cash flow (FCF) to cover these distributions. Last year's FCF was an impressive $6.6 billion.
Considering that you can discover shares offering a higher dividend yield than Costco's 0.5%, it's essential to bear in mind that the dividend is merely a fraction of your potential total income. Investors chasing dividends also look forward to the massive special dividend that Costco may pay again in the future.
Given Costco's significant dividends, investors might want to explore potential financing options to reinvest these funds for further investing opportunities. The company's consistent annual increases in dividends and impressive free cash flow make it an attractive option for income-focused investors.