Costco Shares Fall Even as August Sales Rise

Costco stock buy

Author: Tim Phillips

September 4, 2020

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American retailer Costco Wholesale Corporation (NASDAQ: DKNG) saw its shares initially climb on news of better August sales numbers. 

However, the share price later fell with the broader market, ending the day down 2.9% – although this still outperformed the broader S&P 500’s decline of 3.5%.

Tim’s Take:

Costco is the epitome of stability in the retail space. The company runs a nationwide chain of membership-only warehouse stores that sell all manners of goods in bulk.

The company has a subscription service whereby members pay an annual fee in return for being able to access the low-cost goods that Costco sells wholesale at its locations.   

It’s been a phenomenal success and that success continued throughout the Covid-19 pandemic. Costco’s latest August sales figures were remarkable. It recorded a 13.2% increase across all its stores in August versus the same month last year.

Meanwhile, online sales more than doubled in August. Total sales for the month sat at around US$13.6 billion – showing readers how much of a giant Costco actually is.

Costco keeps winning

What’s even more impressive is that the company boasts such a high membership renewal rate (of 91% in the US and Canada – where most of its outlets are).

Like other top-tier retailers in the US, the pandemic has highlighted those who have invested in their digital capabilities. Costco has been one of the key beneficiaries of its online presence and reliable customer base.

If that wasn’t enough, investors can also get a small dividend from Costco. It started off paying an annual dividend per share of US$0.40 back in 2004.

That annual DPS now sits at US$2.80, meaning it’s expanded at a compound annual growth rate (CAGR) of 13%. 

Depsite that, Costco shares still yield only 0.8% and its dividend payout ratio is around 33%. That means there’s much more room for dividend growth ahead for investors who believe in the continued success of this unique retail business.

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About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.