By Ian Salisbury

Costco Wholesale just announced a big increase to its dividend. But the cult retailer remains a growth stock and investors are more focused on how factors like gas prices affect its bottom line.

On Wednesday, the shopping club known for its mixed nuts, gold bars and beloved Kirkland brand, raised its quarterly dividend 13% to $1.47 a share from $1.30. The new dividend is payable May 15 to shareholders of record on May 1.

Shares of Costco were up 0.4% to $989 on Thursday. Year-to-date they have returned around 15%, outpacing the S&P, which has returned 2.8%, according to FactSet.

Despite the double-digit dividend hike, Costco remains a growth stock by almost anyone's definition. The new dividend payout rate boosts Costco's dividend yield only slightly, to 0.6% from 0.5%, based on Thursday's trading price.

Moreover, Costco trades at more than 45 times forward earnings, compared to just 15 for the average retail stock.

Income investors enjoy one consolation: Costco does intermittently pay out large special dividends, the most recent being in January 2024, when it issued a special payout of $15 a share. Analysts have speculated that Costco could be getting ready to make another large payout soon, given its history of declaring these every two to three years and the fact that cash has been piling up on its books.

Costco finished last quarter with $18 billion in cash and short-term securities on its balance sheet, up nearly 40% on the prior year and similar to the level where it stood at the time of the 2024 payout, noted CFRA analyst Arun Sundaram in a note last week. But even factoring in a special $15 dividend, prorated over, say, three years, Costco's dividend yield would only amount to 1.1%.

For that reason, even after this week's dividend hike, many Costco investors are likely fixated on a different number: The price of gasoline. The average U.S. price last week was $4.07, up nearly $1 from a year ago, according to website GasBuddy.

While high gas prices tend to hurt retailers by eating into shoppers' budgets, for Costco it's the opposite. Costco itself operates about 750 gas stations, which are often the low-cost option in their neighborhood. That in turn drives foot traffic at its warehouses, boosting overall sales.

"Generally speaking, we see about half of members that will shop at the gas station will also cross-shop at the warehouse," explained CFO Gary Millerchip on Costco's March conference call. "If gas prices start to increase, then we tend to see our value proposition resonates better with members just because obviously we want to be the pricing authority on gas."

While most retail stocks struggled during March, amid the Iran war, Costco held up remarkably well. The shares posted a loss of 1.4%, compared to 7.3% for the sector as a whole.

All in all, Wall Street analysts forecast Costco earnings per share to grow 10% to 12% over the next two years. Despite the high P/E, the average broker price target is $1,087, implying upside of about 10% from current levels.

Write to Ian Salisbury at ian.salisbury@barrons.com

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April 16, 2026 14:57 ET (18:57 GMT)

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