Costco Investors Will Get A “Special” Treat For Christmas

Key Points

• Costco is set up to deliver a special dividend in December that could equal or top the last.
• Analysts and institutional trends provide support for this market; a significant pullback is not anticipated before December.
• A planned increase in capital expenditures is expected to accelerate growth in 2026.

Costco NASDAQ: COST investors can look forward to a special treat this Christmas: a special dividend. While not yet announced, the trends suggest this company is on track to deliver another substantial payment to its shareholders. The company generates significant cash flow and free cash flow, has built a $14 billion cash pile, and has a history of special payments, with the last two made in December.

The critical takeaways are that, whether or not the special dividend is paid in December, a special dividend is on the way and will likely top $10 per share, potentially reaching $15, for a yield of roughly 1% to 1.5%. 

Costco Outperforms in Q4: Cash Pile Swells in F2025

Costco had a solid quarter in FQ4, outperforming the broad market and its industry, producing 8.1% year-over-year growth and strong margins. The revenue growth outpaced MarketBeat’s consensus figure, driven by a 6.4% system-wide comp, an increase in store count, and a rise in membership.

Canada was strongest with an 8.3% gain, but all segments, including the core US segment, grew by at least 6%. Membership, a forward-looking metric, increased by 6.3%, while digital, another key growth pillar, expanded by 13.6%.  

Earnings news is also favorable to the special dividend outlook. The company generated substantial margins at all levels, growing its operating, net income, and GAAP earnings at an accelerated pace compared to revenue.

The critical detail is that net income increased by nearly 10% and GAAP earnings by 11%, providing ample cash flow to enable the company to increase its capital spending outlook without impairing its financial health.

Executives are planning to open as many as 35 new stores in FY2026, a 3.8% increase that will underpin system-wide growth for the foreseeable future. 

The balance sheet details highlight the company’s strength and ability to pay a special dividend. The cash pile swelled by 43% in F2025 while receivables, current, and total assets all increased.

Current assets increased by $4.1 billion, or 12%, while total assets increased by $7 billion, or 10%, offsetting the smaller increases in liabilities to drive a 23% increase in shareholder equity.

The company’s leverage is also very low, with total liabilities about 1.6 times the equity and long-term debt much lower. Regarding the cost of the anticipated special dividend, the 2023 payment amounted to $6.7 billion, well within Costco’s ability to pay in 2025. 

Analysts and Institutions Provide Solid Support for Costco in 2025

Analyst sentiment trends dampened in early 2025, with several price target reductions, but it remains bullish for this market and provides solid support. The group of 26 tracked by MarketBeat exhibits a bullish bias; 17, or 65%, of them rate the stock as a Buy, with no Sell ratings, and the price target continues to trend higher.

The bulk of revisions are to an above-consensus level, amounting to new all-time highs when reached. Likewise, the institutional trends are bullish for Costco stock, including a 58% ownership rate and the group buying on balance all year at a pace of more than $2 to $1. 

The technical outlook is mixed, with shares falling in the wake of the release but holding above critical support levels. The crucial support level aligns with the bottom of the near-term trading range at $900, a level where institutional activity is likely to increase.

Assuming COST remains above the critical support level, it should rebound quickly and rally into the end of the year as dividend hunters and dividend scalpers move into the market.

A move to new highs will mark a shift in the market, opening the door to another sustained rally that could take this stock to the analysts’ high-end range near $1225.