Costco Will Pay a $1.47 Dividend on Nov. 13 — Here’s Whether It Makes More Sense to Use a Dividend Reinvestment Program or Keep the Income
Shareholders of Costco Wholesale (NASDAQ: COST) can look forward to some dividend payouts heading their way soon. The dividend of $1.47 per share will be paid out on Nov. 13 to shareholders of record at the close of business on Oct. 30.
When that time comes, shareholders will have a decision to make. They can either take the dividends as income, or use them in a dividend reinvestment plan (DRIP), which purchases more Costco shares. Depending on your investing goals, one may make more sense over the other.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Why establishing a Costco DRIP makes sense
The power of a DRIP is that investors can use dividends to increase their stakes in a company without using their personal funds. For a stock like Costco, having additional shares can help build a larger position that can compound into meaningful returns, given its stock price appreciation potential. For example, over the last five years, as of this writing, Costco shares are up 117%, compared with the S&P 500‘s 72.6% return.
When Costco pays its $1.47-per-share dividend, if an investor’s account is enrolled in a DRIP, the funds will be used to purchase additional shares. Costco has also paid a special dividend every few years, with the last payout of $15 per share in 2024. When that special dividend is paid out, if an account supports a Costco DRIP, the dividend will also purchase additional shares.
Using the dividend to automatically purchase shares would make the most sense for someone with a significant number of shares, as well as for someone with many working years ahead. That type of individual may not need the income right now, and they could just use the DRIP to build a larger position. Then, when they are ready to retire, they could just turn off the DRIP and collect the dividend payouts for income.
Why using Costco’s dividend as income makes sense
For shareholders at or around retirement age, as well as for those with only a small stake in the company, considering only taking the income could make more sense. When folks are considering retiring or are about to retire, they may be less worried about stock price appreciation and more focused on generating income.
For investors who may not own many shares of the company, it may make more sense to take the dividend as well. For example, if someone owned 20 shares of Costco, their dividend payout would be $29.40 on Nov. 13. Costco stock closed at $982 on Oct. 14, so reinvesting the dividend would still increase a shareholder’s stake. However, it may be less meaningful to add less than $30 worth of fractional shares than it would be to keep the dividend and invest it into another stock that trades at a lower share price, or to just use it as pure income.
