Tuesday, April 25, 2017

Costco Announces $7 Per Share Special Dividend

Today Costco(COST) announced a special dividend of $7.00 per share.  That's in addition to a $0.05 increase in the regular quarterly dividend of $0.45/share to $0.50/share.  To receive an 11.1% raise plus a special dividend which comes out to a 4% payment based on today's close of $172.68.  You can read the company press release here.  The stock is up 3% in after hours trading.

The company stated the special dividend will amount to a $3.1 billion dollar payment to shareholders. That's quite a bit of money. For fiscal 2016 the company paid paid out $746 million to shareholders via dividends. According to the Costco's 2017 Q2 balance sheet they had $4.7 billion in cash on hand. But the company stated they were funding this dividend with additional borrowings. Once again according to Costco's recent balance sheet the company has approximately $5 billion worth of debt. Of that $2.2 billion is current.  The company most recently paid a special dividend of $5 in 2015.

Personally I love dividends, but I don't like to see a company borrow extensively to pay for it.  Of course the company is good financial condition to afford this dividend. My bet is the company has secured extremely low rate financing to secure this dividend payment. Though the conservative me wishes the funds were invested into new stores, website upgrades, and things of that nature. In my opinion that would better cement the company with new sales at a time when competition is becoming even more fierce.

Either way at the very least if you are a Costco shareholder and member as I am you'll earn a few extra bucks to spend at their warehouse buying a celebratory case of beer, bottle of wine, or handle of booze. As always enjoy it responsibly!

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