That's because the company has just announced it's paying shareholders a special dividend of $7 per share on top of its regular scheduled $0.275 quarterly cash payout. Special dividends are one-time, irregular distributions. Because they're infrequent, they are often far larger than scheduled quarterly dividend payments. Costco's dividend is payable on Dec. 18 to holders of record on Dec. 10.
Many publically traded U.S. companies are declaring special dividends as the likelihood of government-imposed U.S. dividend tax increases draws closer. A dividend paid on or before Dec. 31, 2012, will be taxed at the standard 15% rate. Depending on the fiscal cliff negotiations and your personal income tax bracket, the dividend tax rate after that could be as high as 43.4%.
Costco is currently one of 77 firms paying a special dividend this quarter. And while this special dividend is subtracted from the stock price, share prices often recover quickly after dividends are paid. What makes Costco even more interesting as a trade is the company's outstanding technical and fundamental outlook.
Acclaimed as one of the world's most successful retailers, Costco has amassed a huge cash reserve of $3.5 billion. This reserve has been built on consistently strong same-store sales growth. Between August and November, same-store sales increased at least 6% each month.
From a technical perspective, COST shines.
Shares of the big-box retailer have been in a major uptrend for the past two-and-a-half years. Since hitting a low of $51.96 in June 2010, the stock has nearly doubled. Shares are currently trading at the $104 mark. (more)
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