Costco just gave Wall Street something to chew on. On April 16, 2025, the Issaquah-based retail giant announced a 12.1% hike in its quarterly dividend—raising its payout from $1.16 to $1.30 per share. That kind of bump isn’t just a nice surprise for shareholders; it’s a powerful signal of financial strength and long-term confidence. But with the stock sitting near record highs and economic clouds still hovering, the big question for investors is: does this dividend hike make Costco a buy—or is all the good news already priced in?
Dividend Strength in a Volatile Market
In a market environment full of conflicting signals, companies that can offer both growth and income are increasingly attractive. Costco’s decision to raise its dividend by over 12% shows the company isn’t just coasting—it’s leaning into its strengths. This latest dividend is payable on May 16, 2025, to shareholders on record as of May 2, 2025, and it underscores the company’s reliable cash generation and conservative financial stewardship.
That’s a big deal. Especially at a time when consumer sentiment remains fragile, inflationary pressures continue to ripple through the economy, and retail peers like Target, Dollar Tree, and Dollar General are struggling to keep pace.
Costco’s Stock Performance vs. Competitors
While the S&P 500 has seen a bumpy ride over the past 12 months, Costco has surged 36.1% year over year. That performance leaves rivals in the dust—Target’s down 45.7%, Dollar Tree has dropped 40.1%, and Dollar General is off by 38.6%. The gap isn’t just about perception. It’s backed by sales, earnings growth, and strategic execution.
Despite its rise, Costco is still 10.2% below its February 13, 2025, 52-week high of $1,078.23. The stock closed yesterday at $967.75. While some may interpret that pullback as a cooling-off period, it could also represent a window of opportunity—for those who believe in Costco’s long-term runway.
Premium Valuation, Premium Company
Here’s where things get a little murkier. Costco isn’t cheap—and it never really has been. The stock is trading at a forward 12-month P/E ratio of 50.72. That’s well above the industry average of 31.59 and towers over the S&P 500’s 19.85. Even compared to its own history, it’s rich: the company’s median P/E over the past year was 49.77.
Stack it against peers, and the premium becomes even clearer. Dollar General trades at 15.74 times forward earnings, Dollar Tree at 13.70, and Target at just 9.91. But none of those names come with Costco’s growth consistency, its enviable membership model, or its ironclad customer loyalty.
The Membership Model That Keeps on Giving
One of the things that sets Costco apart is its membership-based structure. It’s not just a fee—it's a relationship. And that relationship is sticky. The company boasts a 93% renewal rate in the U.S. and Canada, and 90.5% globally. That’s rarefied air in the retail space.
As of Q2 fiscal 2025, Costco had 78.4 million paid household members, up 6.8% from a year earlier. Even more telling, executive memberships—those high-margin, high-loyalty accounts—jumped 9.1% to hit 36.9 million, now representing nearly half of all paid members and accounting for nearly three-quarters of worldwide sales.
This isn’t just a nice-to-have. Membership fee income climbed 7.4% year over year, and a recent increase in those fees is expected to push those numbers even higher in the coming quarters. The membership flywheel is alive and well.
Sales Momentum in a Challenging Economy
Costco continues to deliver where it matters: the top line. In March 2025 alone, comparable sales rose 6.4% year over year. That followed gains of 6.5% in February and 7.5% in January. E-commerce, too, is firing on all cylinders, with adjusted online comparable sales soaring 17.5%.
Overall net sales for March reached $25.51 billion, an 8.6% jump from the year prior. These are not one-off numbers. They’re part of a consistent trend that shows Costco is winning market share and keeping value-conscious shoppers coming back.
Expansion Plans and Capital Discipline
Costco has no plans to sit still. The company opened just one new warehouse in Q2, but it’s planning an aggressive rollout through the rest of fiscal 2025. Management has outlined plans for 28 new locations—25 new warehouses and three relocations—further expanding its reach into domestic and international markets.
And it’s not just growing for the sake of it. Costco ended Q2 with $13.16 billion in cash and cash equivalents, including $802 million in short-term investments. It allocated $1.14 billion toward capital expenditures during the quarter and has penciled in a hefty $5 billion in capex for the full fiscal year.
That level of investment, paired with prudent financial management, sets Costco apart from many peers who are tightening belts or cutting back on growth initiatives.
Earnings Outlook Supports the Narrative
The numbers aren’t just strong—they’re trending upward. The Zacks Consensus Estimate for Costco’s fiscal 2025 earnings per share has moved up to $17.95, and 2026 estimates have ticked up to $19.75. That implies growth rates of 11.4% and 10%, respectively—solid double-digit gains that reflect Costco’s momentum.
In a world where earnings expectations are constantly being revised downward, Costco stands out by delivering clarity and consistency.
So… Is Costco a Buy Right Now?
Here’s the dilemma. Costco is undeniably a best-in-class retailer. It has one of the most defensible business models in the market, growing sales, rising membership income, bulletproof fundamentals, and now, a fatter dividend. That 12% hike isn’t just a payout—it’s a message.
But investors need to be mindful of valuation. Even the best stocks can stall when they get too far ahead of themselves. Costco’s elevated P/E means it’s priced for perfection, and any earnings miss or macroeconomic stumble could lead to a pullback.
For long-term holders, there’s no question—Costco remains a solid cornerstone in any portfolio. It offers income, growth, and a moat that few retailers can match. But for new investors? Patience might pay. Waiting for a better entry point—whether it’s a dip, a market correction, or a sideways period—could make all the difference in maximizing long-term returns.
Conclusion
Costco’s 12.1% dividend hike is more than a quarterly event—it’s a reaffirmation of the company’s strength, consistency, and shareholder-first mentality. With stellar fundamentals, a loyal customer base, strong earnings growth, and a disciplined expansion strategy, Costco looks built to last. The only caveat? Valuation. For existing shareholders, it’s a comfortable hold.
For new buyers, it may be wise to wait for a more attractive price before diving in, or grab a hot dog, or slice from the canteen.
