3 reasons to buy Costco
The warehouse retailer is seeing strong sales and strong dividend growth.
By Jim Woods, Investorplace.com
Costco (COST) was a darling of investors during the economic downturn as the warehouse discounter offered cash-strapped consumers a deal and saw strong profits as a result. But with the worst of the global recession in the rear-view mirror, investors are wondering what’s in store for Costco stock.
Now that economic conditions are improving, will shoppers keep ringing Costco’s register? Chances are they will, if strong sales numbers recently are any indication. That means investors could still see some upside in COST shares.
If you’re on the fence about Costco, here are three reasons you should hold your shares or buy in:
Solid profit and revenue:
On March 3, Costco reported a second-quarter profit that was up 25% from
the same quarter a year ago. The company said it earned $299 million, or 67
cents per share, for the quarter vs. a profit of $239 million, or 55 cents per
share, a year earlier.
And though Costco’s bottom-line number fell shy of consensus expectations, the top-line revenue number of $18.74 billion bested expectations. Those better-than-expected revenues also were up 11.3% year-over-year.
A bigger dividend: On April 22, the warehouse company decided to spread the wealth among shareholders by raising the Coscto dividend to 20.5 cents per share from 18 cents per share.
It was one of several
high profile stocks to raise dividends recently. The 14% increase in
quarterly dividend means Costco is confident in its fiscal outlook going
forward, and in its ability to keep shoppers happy. And if history is any guide, there will be
higher dividends to come down the road. The company has more than doubled its
dividend over the past six years, and it’s raised its dividend in each calendar
year since 2004.
Costco same store
sales rising. Costco’s fiscal Q2 same-store sales -- a measure of sales at
stores open at least a year and a very important metric of a retailer’s
health -- jumped 9% in the quarter.
That number falls to a 3% rise if you exclude the impact of gasoline sales and foreign exchange, but whichever way you count it, same-store sales are on the rise. That rise was seen again in March, as Coscto same store sales surged 10% for the month. Wall Street was expecting COST numbers to come in at just 9.3%.
Find out three more reasons to buy Costco stock here.
Copyright © 2014 Microsoft. All rights reserved.
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.