Dollar General (NYSE:DG) and Costco Wholesale (NASDAQ:COST) are both large-cap retail/wholesale companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, profitability, valuation, risk, analyst recommendations and institutional ownership.
Earnings and Valuation
This table compares Dollar General and Costco Wholesale's gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Dollar General | $27.75 billion | 1.57 | $1.71 billion | $6.73 | 26.47 |
Costco Wholesale | $166.76 billion | 0.85 | $4.00 billion | $8.85 | 36.05 |
Costco Wholesale has higher revenue and earnings than Dollar General. Dollar General is trading at a lower price-to-earnings ratio than Costco Wholesale, indicating that it is currently the more affordable of the two stocks.
Dividends
Dollar General pays an annual dividend of $1.44 per share and has a dividend yield of 0.8%. Costco Wholesale pays an annual dividend of $2.80 per share and has a dividend yield of 0.9%. Dollar General pays out 21.4% of its earnings in the form of a dividend. Costco Wholesale pays out 31.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Dollar General has raised its dividend for 5 consecutive years and Costco Wholesale has raised its dividend for 16 consecutive years. Costco Wholesale is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Profitability
This table compares Dollar General and Costco Wholesale's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Dollar General | 7.84% | 36.07% | 10.22% |
Costco Wholesale | 2.50% | 24.50% | 7.73% |
Institutional & Insider Ownership
90.9% of Dollar General shares are held by institutional investors. Comparatively, 67.2% of Costco Wholesale shares are held by institutional investors. 0.7% of Dollar General shares are held by company insiders. Comparatively, 0.2% of Costco Wholesale shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Analyst Ratings
This is a summary of recent ratings and recommmendations for Dollar General and Costco Wholesale, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Dollar General | 0 | 3 | 16 | 2 | 2.95 |
Costco Wholesale | 0 | 11 | 19 | 0 | 2.63 |
Dollar General currently has a consensus price target of $230.5909, indicating a potential upside of 29.44%. Costco Wholesale has a consensus price target of $381.04, indicating a potential upside of 19.43%. Given Dollar General's stronger consensus rating and higher possible upside, research analysts plainly believe Dollar General is more favorable than Costco Wholesale.
Volatility & Risk
Dollar General has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500. Comparatively, Costco Wholesale has a beta of 0.66, meaning that its share price is 34% less volatile than the S&P 500.
Summary
Dollar General beats Costco Wholesale on 10 of the 18 factors compared between the two stocks.