Costco Shares Up 26% This Year, Dividend Yield 1.1%

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Costco Wholesale ( COST ) has outperformed its rivals this year as consumers continue to flock to its discount warehouses despite an increase in membership fees.

Costco's shares are up 26% this year, about double the S&P 500's rise and well above the gains at fellow big-box discountersWal-Mart Stores ( WMT ) andTarget ( TGT ).

The stock broke out above a split-adjusted 97.63 flat-base buy point in strong trade Nov. 30 but has since pulled back and is just above the entry.


"Costco continues to be a dominant retail wholesaler based on the breadth and quality of the merchandises it offers," Zacks Equity Research said Dec. 11.

It added that "cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities," helping the company grow despite the weak economy.

Costco reported Dec. 12 that fiscal first-quarter profit rose 19% to 95 cents a share, edging above Wall Street estimates. But it was down from a 29% jump the previous quarter and marked the first time in five quarters that profit growth slowed.

Revenue for the period rose 10%, down from Q4's 14% gain.

Citigroup ( C ) reiterated its neutral rating on the stock Friday, saying Costco has benefited from a fee increase enacted late last year. But it cited technology investments and possible food inflation in 2013 as risks to its outlook. Low margins amid stiff competition are also a concern.

Costco CEO Craig Jelinek asked President Obama last month not to raise taxes on the middle class as part of a deal to avert the "fiscal cliff," a combination of tax hikes and spending cuts set for Jan. 1.

The company soon after announced a special cash dividend of $7 a share to reward shareholders ahead of an expected increase in dividend tax rates.

The one-time payout made Dec. 18 came on top of the regular quarterly dividend of 27.5 cents a share, which is good for an annual yield of 1.1%, below the 2.1% average for the S&P 500. Costco has nearly tripled its dividend since 2004, boosting it even during the recession.

Costco's 82 Composite Rating tops the nine-member Retail-Major Discount Chains industry group.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: C , COST , TGT , WMT

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As of 12/17/2014, 04:15 PM


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