Costco Shareholders Get a $13 Billion Free Sample

Costco is passing out dividends like free samples of salami as traders seek shelter from AI’s massive swings in the hallowed aisles of the members-only retailer. 

The glizzy-seller yesterday said it’ll return some of its excess cash flow to shareholders with its largest-ever special dividend. The one-time payout of $30 a share will put $13.3 billion back in shareholders’ pockets starting Dec. 4. Costco’s board also refreshed its plan to buy back up to $4 billion worth of its shares, which now runs through November 2030. The old version, which would’ve expired in January, still had about $900 million left to spend. 

Together, the two moves signal Costco’s confidence that it can keep generating cash from shoppers stocking their pantries as if their households had six teenagers to feed. 

Hedging with Hot Dogs

Costco has become a haven for traders tired of AI stocks’ volatility who want something more reliable — like a company that hasn’t raised the price of its $1.50 hot-dog-and-soda combo since the deal’s 1985 inception. Costco’s also famously refused to charge more than $4.99 for rotisserie chickens, inflation be darned.

The steadfast strategy has helped keep both shareholders and members loyal:

• More than nine in 10 Costco members in the US and Canada last quarter paid to renew their loyalty cards — a must after the retailer cracked down on card-sharers at stores about two years ago. Costco notched a $3 billion profit, as shoppers lined up at the retailer’s gas stations for discounted gas, a rarity amid the Iran War.
• Costco also collected roughly $370 million in tariff refunds over the past two quarters, and says it’s reinvesting most of the pile back into its aisles, cutting prices on grocery staples and some nonfood items. Walmart and Amazon have also said they’re using tariff refunds to help keep prices low. 

Kirkland Signature Move: Costco is piling up cash and giving it back to both investors and shoppers — yesterday’s special dividend is Costco’s sixth since 2012. “This combination of strong execution, durable cash generation and shareholder returns helps explain why investors continue to flock to COST as a high-quality, defensive compounder,” Jefferies analysts wrote in a note Wednesday. Costco’s shares are ahead of the Nasdaq for the year, and Jefferies sees about 3% upside to its $1,100 price target. Because if anything can protect traders from AI volatility, it’s all ~1,200 calories of Costco’s “Forbidden Glizzy.”