Costco has raised its dividend, but the payout remains relatively modest for income-focused investors. The retailer increased its quarterly dividend by about 13.1%, from $1.30 to $1.47 per share on April 15, bringing the annual payout to $5.88 per share.
At a share price of around $960, a $10,000 investment would buy roughly 10.4 Costco shares. Those shares would generate just over $61 in annual dividend income based on the new payout, translating to a dividend yield of about 0.61%, according to The Motley Fool.
Costco dividend is still low
So, Costco is not really a stock for investors looking for high regular income. A 0.61% dividend yield is very low compared with many other dividend-paying stocks. Investors buying Costco should not expect the regular dividend to provide a large income stream.
But Costco has another way of rewarding shareholders: special dividends. The company has declared five special one-time dividends since 2012. The most recent one was announced in 2024 and paid $15 per share. The possibility of another special dividend could give Costco investors an additional payout beyond the regular dividend.
Why investors still like Costco stock
The low dividend yield does not tell the full Costco investment story. Costco's appeal is mainly linked to its business growth and the strength of its retail model, rather than its regular dividend. The Motley Fool said Costco's business is performing strongly.
{{/usCountry}}The low dividend yield does not tell the full Costco investment story. Costco's appeal is mainly linked to its business growth and the strength of its retail model, rather than its regular dividend. The Motley Fool said Costco's business is performing strongly.
{{/usCountry}}Costco's stock is expensive, but some investors may still see value in holding it for years. Costco's valuation is high and the stock is far from cheap. However, the publication's view is that Costco can still be a buy for long-term investors despite the high valuation.
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This means Costco investors are mainly betting on the company's future, not just its dividend. Someone investing $10,000 should not look at Costco as a stock that will quickly produce hundreds or thousands of dollars in yearly dividend income. Instead, the bigger reason to own the stock is the potential for the company's business and share price to grow over time.
Costco not among top 10 picks
The Motley Fool's Stock Advisor does not currently rank Costco among its top 10 stock picks. The Stock Advisor analyst team recently highlighted what it believes are the 10 best stocks to buy now, but Costco was not included on that list.
Netflix and Nvidia show the upside
Netflix as an example of how its stock picks can perform over the long term. Netflix was included in the Stock Advisor list on December 17, 2004. The Motley Fool says that a $1,000 investment in Netflix at the time of that recommendation would have grown to $432,621, based on the figures cited by the publication.
Nvidia is another example highlighted by Stock Advisor. Nvidia was added to the list on April 15, 2005. The Motley Fool says that a $1,000 investment made at the time of that recommendation would have grown to $1,335,314, based on its cited figures.
Stock Advisor returns beat S&P 500
Stock Advisor says its overall returns have beaten the broader market. The service's total average return is listed at 976%, compared with 214% for the S&P 500, according to The Motley Fool. The bigger takeaway for Costco investors is simple: the dividend is not the main attraction.
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A $10,000 Costco investment currently produces only around $61 a year in regular dividends, but investors may still buy the stock because they believe Costco can deliver stronger long-term returns through business growth, share-price gains and occasional special dividends.
Is Costco good for income?
For investors focused mainly on monthly or yearly income, Costco may not be the best choice. But for investors who want exposure to a strong retail company and are willing to hold the stock for the long term, the low dividend yield alone may not be enough reason to avoid it.
Costco's dividend increase is still important. The company raised its quarterly payout by about 13.1%, showing that shareholders are receiving a higher regular payment than before. However, even after the increase, the dividend remains small compared with the stock's roughly $960 share price.
In short, Costco is a growth-and-quality story more than an income story. The regular dividend on a $10,000 investment is only about $61 a year, but Costco's history of special dividends and its strong business performance are part of the reason some long-term investors continue to hold the stock.