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Costco - >>> $5,000 Invested in These 3 Stocks Could Make You Rich Over the Next 20 Years


Motley Fool

By Selena Maranjian

Mar 12, 2022


https://www.fool.com/investing/2022/03/12/5000-invested-in-these-3-stocks-could-make-you-ric/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Costco has a winning formula likely to keep winning


These stocks are all down recently, but their growth prospects remain intact.

Many investors are looking to get rich quick, but the savvy among us realize that it's not likely to happen. Worse, many common attempts to get rich quick -- by purchasing penny stocks, for instance, or investing using a lot of margin -- tend to end up making people poorer, not richer.

The most reliable way to build wealth via stocks is to do so over decades. The most impressive stock performers in the market have often rewarded their longest-term shareholders the most. Even investing just $5,000 can turn out fairly well. If it averages, say, 15% annual growth over 20 years, it would grow to more than $80,000. An average growth rate of 20%, which is hard to achieve, would get you to more than $191,000. (Of course, investing that $5,000 regularly, or larger sums regularly, can produce more spectacular results.)

Here, then, are three companies that seem poised to perform very well over the long run. See if any or all of them interest you.

1. Costco

Let's start with the discount warehouse titan, Costco. You might think that it's not as exciting a stock as, say, Amazon.com or Apple, but its performance is not too shabby at all. Over the past decade, its stock has averaged an annual return of 20.4%, enough to turn a $10,000 investment into $64,045 -- and that's without reinvesting dividends.

Still, the future matters much more than the past when it comes to investing -- and Costco's future looks bright. It's designed to keep cranking out profits in large part by treating its employees, customers, and shareholders well. It pays above-average wages with above-average benefits, caps its markups on products at around 14%, and pays a dividend that, while not huge at 0.6%, has been growing at an annual average rate of 12%. Its Kirkland brand is well respected and known for quality, and its annual membership fees of between $60 and $120 deliver close to $4 billion in revenue. <<<


>>> Costco


https://www.fool.com/investing/2022/03/13/3-dividend-stocks-that-will-hold-up-no-matter-the/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


People always need essentials like food, toilet paper, and other home goods, no matter what the economy is doing. Furthermore, a bargain never goes out of style. That's why Costco is a safe-haven stock amid the market's pessimism.

Costco has a rock-solid membership business model that allows it to price its goods and services below any other major retailer, while generating most of its profit from membership fees. Last quarter, Costco's membership revenue of $967 million comprised the majority of its $1.81 billion in operating income, on $50.1 billion in sales.

Stripping out the membership revenue, the remaining operating margin was just 1.65%. You would be hard-pressed to find another retailer than can make it on a 1.65% operating margin. Even Walmart's operating margin was 3.86% last quarter.

Those low prices led Costco to post really strong 14.4% same-store-sales growth last quarter. And revenue could get even better this summer, too. That's because this summer will mark five years since Costco's last membership price increase.

Asked about a fee increase on the last conference call with analysts, CEO Richard Galanti noted that over the past 15 years, Costco has raised the price of its membership about once every five years. The last increase was in June 2017. If there is a membership fee increase, that could lead to even more profit for Costco in the year ahead. And amid rising inflation, it's a good bet that more people will sign up for Costco to get deals on food, electronics, and gas -- all the items experiencing high inflation right now.

While Costco's P/E multiple looks high at over 40 times earnings, it also grew operating earnings 35% last quarter. A fee increase would only supercharge that growth. And though Costco's dividend yield stands at a paltry 0.6%, the company has also paid out special dividends on top of that every few years. The last one was a $10-per-share dividend in December 2020, or a little less than 2% at today's stock price. Given Costco's pace of special dividends, another could be in the offing this year or next year.

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