Research from Vanguard found that about half of investors prefer to invest in dividend-paying companies, believing such stocks deliver higher returns and lower volatility than non-dividend payers.
“Many of these investors said they believe that the stocks of companies paying high dividend rates have higher returns and lower volatility than other stocks, and that such companies care more about their investors than companies paying low dividend rates,” the report states.
Costco, it turns out, is a textbook example of why that instinct tends to pay off over time.
On April 15, the warehouse giant‘s board quietly approved a meaningful bump to its quarterly payout, and long-term shareholders have a lot to smile about.
Costco raises its dividend stock payout again
Costco’s board declared a quarterly cash dividend increase from $1.30 to $1.47 per share, effective May 15, 2026, for shareholders of record as of May 1, 2026. That works out to $5.88 per share on an annualized basis, a 13.4% jump from the prior rate.
The big-box retailer has raised its dividend significantly over two decades, showcasing the durability of its cash flow.
Costco is fairly recession-resistant, allowing it to generate predictable earnings across market cycles.
Moreover, its robust membership model enables the company to unlock a growing, recurring revenue stream each year.
Related: Costco banks on membership growth to drive dividend payout
According to Vanguard, about 80% of equity income investors reinvest their dividends, drawn to the power of compounding returns.
For a dividend stock like Costco, that compounding effect has been remarkable over time.
Valued at a market cap of $437 billion, Costco stock has returned 1,720% to shareholders over the past two decades.
If we adjust for dividend reinvestments, cumulative returns are closer to 2,580%.
Key dividend ratios for Costco stock
Here’s a snapshot of where the dividend metrics stand right now.
- Quarterly dividend: $1.47 per share
- Annualized dividend: $5.88 per share (post-hike) / $5.20 (trailing 12 months)
- Dividend yield (current): About 0.58%
- Annual dividend expense: $2.27 billion
- Free cash flow (2026E): $8.25 billion
- Dividend payout ratio: Approximately 27.5%
- Dividend growth (year-over-year): About13%
- Next ex-dividend date: May 1, 2026
- Next payment date: May 15, 2026
The yield looks modest at first glance. But that’s where the yield-on-cost story gets interesting.
Why early Costco investors are cashing in on this dividend stock
Costco’s current dividend yield of around 0.58% might not impress income-seeking investors. So let’s dive deeper.
Consider someone who allocated $1,000 towards Costco stock in 2006. At around $56 per share at the time, that $1,000 would have bought roughly 18 shares.
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The annualized dividend back then was just $0.46 per share, generating about $8.28 a year, a yield of 0.82% on the original investment.
Fast forward to today.
Those same 18 shares now pay out $5.88 per share annually. That’s $105.84 a year in dividend income from the original $1,000 invested. The yield-on-cost has grown to 10.6%, without ever adding another dollar.
Moreover, if you had reinvested these dividends, you would own 26 Costco shares today, raising the effective yield to more than 15%.
That’s the quiet power of owning a quality dividend stock for the long haul.
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The business behind Costco dividend stock
In the second quarter of fiscal 2026:
- Costco reported net sales of $68.2 billion, up 9.1% year over year.
- Net income came in at $2.04 billion, a 13.8% increase, while diluted earnings per share hit $4.58, also up 13.9%.
- Membership income grew 13.6% to $1.36 billion. That number matters more than most people realize.
- Membership fees are essentially pure profit, and with 82.1 million paid members and a worldwide renewal rate of 89.7%, the engine driving Costco’s dividends is firing on all cylinders.
Bank of America rates Costco a buy, with a $1,185 price target, citing membership fee revenue that generates roughly $5.2 billion in near-pure-profit annually.
The firm’s analyst Robert Ohmes has argued that Costco still has meaningful upside from current levels.
More broadly across Wall Street, the 23 analysts covering Costco stockcarry a consensus “moderate buy” rating and an average price target of $1,102, implying roughly 10% upside from current levels.
What’s fueling Costco’s growth
The dividend increase reflects a company in good health.
- Q2 comparable sales rose 7.4%.
- Digitally-enabled comparable sales surged 22.6%, with app visits jumping 63% and e-commerce average order value climbing 15%.
- Costco operates 917 warehouses, with plans to reach an estimated 942 by fiscal year’s end.
- New locations are coming to the U.S., Canada, and internationally, adding future revenue runways to support continued dividend growth.
The business is built to keep rewarding shareholders — quietly, consistently, and year after year.
Related: Is a Costco membership worth it just for gas?
