The stock performance of Costco Wholesale this year may be disappointing investors, but the warehouse club may soon make them happy again, if history is any guide. Shares of Costco are down nearly 7% year to date, and the company’s recent earnings beat did nothing to help push them higher. Investors may have been hoping to hear about a special dividend, a one-time payment that is made outside of the regular dividend cycle. While such a payment wasn’t included in last week’s earnings report, some on Wall Street still think an announcement may soon be on the horizon. And that could prove a catalyst for Costco shares to rally. “With $16.2B, or ~$36.50/share in cash on the balance sheet, a special dividend in the nearish term seems likely,” Wells Fargo analyst Edward Kelly said in a note Thursday. COST YTD mountain Costco year to date The company’s last two special dividend announcements came three years apart, in 2020 and 2023, and both were in December. They were $10 and $15 per share, respectively. Costco also declared special dividends in May 2017, February 2015 and December 2012. That brings the average gap between special dividends to 2.75 years, Kelly at Wells Fargo said. Evercore ISI is also among the firms who see a special dividend as a potential catalyst for Costco next year. “For those looking for tangible catalysts, keep your eye on the sneaky special dividend potential, with cash $17bn+ and two years since the last one,” analyst Greg Melich said in a note Friday. “A $9bn special could reward shareholders with a $20ps/2%+ yield.” According to a recent Morgan Stanley analysis, companies typically see their shares outperform after declaring a one-time payout. “We found that special dividend issuing companies outperformed the market by +4.1% in the 6 months following the announcement and +7.8% in the 12-month period postannouncement,” strategist Todd Castagno said in an Oct. 27 note. In the meantime, Costco shareholders have the regular quarterly dividend, which has a currently yield of 0.60%.
