Acquisition COST

Costco Wholesale Company LogoI have been shopping at Costco for a few years now and I love it. While it doesn’t have everything a household needs, it does come pretty close on all of the grocery necessities and then some. But, I think the best part of Costco is the quality of the products they sell. I recently bought a great looking hardwood bedroom set for our home at half the costs. Plus, I noticed Costco integrating more and more organic products for costumers to buy. Gotta love that! Every time I enter the warehouse to shop I think to myself, why the hell am I not invested in this company? Like I mentioned, I’ve been shopping there for several years and I have noticed how well they are doing. For instance, try going there on Saturday and Sunday, its like a zoo and full of people. However, what I like the most is their Kirkland Signature private label that is diversified into many different products. Whats is not to love about this company as their products range from doomsday supplies, gasoline, wine, and even caskets.

Costco Wholesale Corporation operates an international chain of membership retail warehouses. The company acts as a warehouse club for its members while offering discounts on brand name merchandise at substantially lower prices than its competitors. It also has online presence where it sells merchandise while offering free delivery. Costco presents one of the largest and most exclusive product category selections to be found under a single roof. Categories include groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, housewares, apparel, health and beauty aids, tobacco, furniture, office supplies and office equipment. Costco is known for carrying top quality national and regional brands, with 100% satisfaction guaranteed. It is 2nd largest retailer in United States and 3rd largest in the world. As of October 8, 2014, it operates 664 warehouses, including 469 warehouses in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, 6 in Australia, and 1 in Spain.

  • Dividend Yield: 1.1%
  • 3Yr Dividend Growth Rate: 14.1%
  • 5Yr Dividend Growth Rate: 14.6%
  • Payout Ratio: 30.5%
  • P/E: 28.9
  • Consecutive Years of Dividend Raises: 11

I purchased 13 shares for the price of $145.80 adding $20.8 to my annual dividend income.

This is the 4th consecutive time I am initiating an acquisition this year. This transaction is my first purchase of COST ownership. Therefore the acquisition makes it the 28th company I am invested in. Currently, the stake represents to be around 2.6% of my current portfolio.

The P/E is a bit high at 28.9, which I kind of feel like I overpaid, but this company is of high quality with soaring growth potential. The longer I waited on the price to drop, the more it took off. Funny how it works. But the real potential is from future special dividends, as it has already paid 2 substantial special dividends in last 5 years. One was in Dec 2012 @ $7 per share and the other was just recently in Jan 2015 @ $5 per share. Lets hope it continues.

The 12-month dividend income increased to $2,321.

Thank you for reading & have a great day!

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9 Comments

  1. FFdividend on May 15, 2015 at 22:25

    I agree that you pay a little on the high side, but it is a great company. best of luck

    • DividendVet on May 15, 2015 at 22:46

      Absolutely, for a stock like Costco I am willing to pay a lil extra since I shop there and use their services almost on weekly basis. A bit high or not, more than anything it makes me feel good every time I shop there. Probably not the best indicator, but oh well…

      Appreciate your thoughts.

  2. DivGuy on May 19, 2015 at 15:59

    Slightly overvalued, but quality cheap stocks seem to disappear these days! 😉 Great company anyway.

    Cheers,

    Mike

    • DividendVet on May 19, 2015 at 22:45

      Yeah, I really like where Costco is going these days. Their fundamentals are spectacular and more than anything, I love to shop for bargains there.

      Cheers

  3. Dividend Dreams on May 21, 2015 at 10:19

    You paid less than I did :-). I really like Costco for the long haul though. Nice purchase.

    • DividendVet on May 21, 2015 at 11:45

      The cost associated with the purchase price is going to be minuscule down 10, 20 or 30 years down the road. Glad to have as a fellow shareholder. I totally agree, the company is going in the right direction and has been for quite some time now. Lets hope it continues its shareholder friendly practices.

      Thanks for stopping by.

  4. BeSmartRich on June 29, 2015 at 05:39

    I love Costco but it is very hard for me to pull the trigger as it is always loved by many investors that it is priced expensive. I am always looking for an opportunity to get in. The similar companies that I love so much but cannot pull triggers yet are Starbucks, Netflix, Amazon etc…

    Happy investing.

    BeSmartRich

  5. DividendVet on June 29, 2015 at 18:07

    Yeah, I her you. I would love to get my hands on some Starbucks shares, the company is just doing it. The only problem like you said is valuation, I usually stick to the bellow 20 P/E rule for most of my purchases, though at some point you have to pay the price due to massive growth of some of the businesses.

    Best of luck!

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