If you're not familiar, Costco Wholesale ( COST 1.65% ) is a massive discount retailer and it's also a great dividend stock. The wholesaler's business is derived from bulk sales of groceries, consumer health goods, clothing, and its annual membership fees, not to mention a bevy of other products, all of which are distributed from its 828 warehouses worldwide.
And thanks to its focus on selling at a low cost and providing superior service, its loyal customers aren't likely to go elsewhere, even if there's turbulence in the economy. Of Costco's 114.8 million members, 92% opt to renew their membership each year, yielding the company $4 billion since the second quarter of 2021.
In the past 12 months, it sold $206.2 billion in goods. Over the last 10 years, its dividend rose by 187%, powered by 170% growth of the company's quarterly free cash flow (FCF) and a 126% rise in quarterly revenue in the same period. So it's safe to say that the management team is effective in executing the business model.
Its forward dividend yield is currently 0.6%, but that isn't the whole picture. Once every few years, Costco tends to hand out a special dividend, which sends its yield soaring temporarily. Therefore, buying the stock during a sharp downturn is a great way to build exposure to these massive special payments whenever they may happen down the line.
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