Costco is about to offer a special dividend, analysts forecast

Costco Wholesale Corp. is going to offer a special dividend in the near future, say analysts from Stifel and JPMorgan.

Costco COST, -0.47% reported fiscal third-quarter earnings that were well ahead of expectations after Thursday’s closing bell. Same-store sales growth of 5.5% also beat the FactSet consensus for a 5.1% increase.

“We think Costco remains a best-in-class retailer that should continue to lever solid comp growth,” wrote Stifel analysts led by Mark Astrachan. “We also believe it is probable the company declares a special dividend in the next one-to-two quarters.”

Stifel rates Costco shares buy with a price target of $261.

Read: Gap shares plunge as bland merchandise ‘cycle of pain’ continues at namesake brands

“Stepping back, Costco continues to take outsized share versus peers and most retailers and is a core long-term holding,” wrote JPMorgan analysts. “Moreover, we continue to believe a special dividend is coming ($18.5 per share in total cash on hand).”

JPMorgan, which rates Costco stock overweight with a $252 price target, is particularly bullish about the warehouse retailer, calling its value proposition “unrivaled,” and citing its “loyal” customer base and growth potential.

Costco reported a 90.7% renewal rate in the U.S. and Canada during the third quarter. Around the world, the renewal rate was 88.3%.

“Given the company’s expanding online offering and improved value proposition from its Visa credit offering, we see a runway of share opportunity both in-store and online,” JP Morgan said. “Finally, we note the membership fee increase and competitor Sam’s Club closing ~63 stores in the U.S. and Puerto Rico to start the year; we believe this is a good time to own Costco.”

Sam’s Club is part of the Walmart Inc. WMT, -0.54%   portfolio.

Watch: What is trapped value and how can companies unleash it?

In addition to investments

Read More Here...

Bookmark the permalink.