It’s not easy to pick great stocks during times of high inflation. Yet, Costco Wholesale (NASDAQ:COST) offers a powerful combination of shareholder value and consistent dividend payments. Moreover, as Costco offers gasoline price discounts at the pump, revenue-generation opportunities could benefit the company and COST stock.
When the Covid-19 pandemic drove shoppers to Costco stores, Wall Street was reminded of how important this company actually was during times of crisis. While luxury-product shops floundered, Costco thrived as customers counted on the retailer to provide low-priced essential goods.
Fast-forward to mid-2022 and America is facing a different crisis. Prices of a wide array of products have skyrocketed. This is certainly problematic for some retailers, but Costco and its investors could actually prosper in this challenging scenario.
|COST||Costco Wholesale Corporation||$483.46|
What’s Happening with COST Stock?
COST stock in the $400s might look expensive, but is it really? Remember, price and value aren’t the same thing. Costco shares have traded as high as $612.27 during the past 12 months, so relatively speaking, they’re priced at a discount now.
Moreover, some experienced investors might recommend holding dividend stocks during turbulent times. That’s not bad advice at all. Costco is a highly consistent dividend payer and the company currently offers a forward annual dividend yield of 0.74%.
Of course, you don’t want to pick just any dividend stock. The idea is to choose companies that are demonstrating growth. Costco fits the bill perfectly, as the company reported $18.23 billion in net sales for the retail month of May. Year-over-year, this figure represents an increase of 16.9%.
Furthermore, Costco is growing its market presence abroad. In particular, the company has acquired a minority interest in Costco-Taiwan. As a result, Costco now indirectly owns all of Costco-Taiwan.
The Ultimate High-Volume Item
You might think of Costco as a place to buy essential household items, and that’s a fair point. Yet, the retailer also provides another important product at a discount: gasoline.
Robert Nelson, Costco’s head of investor relations, has calculated that the company’s customers could save as much as $1 per gallon compared to what service stations charge for gasoline. This alone could easily make Costco’s $60 fee for an annual basic membership worthwhile.
Thus, price inflation at the pump could drive customers to Costco and thereby give the company a boost in revenue. To quote Costco Chief Financial Officer (CFO) Richard Galanti, “Gas is the ultimate high-volume item that turns very fast.”
Galanti further observed that folks who come to Costco to fill up their tanks will sometimes stay to purchase other products. “For every 100 people who fill up their tanks, about 50 come in to shop. We recognize that most of them aren’t incremental shops, but even if it’s one or two, it’s meaningful,” the CFO explained.
What You Can Do Now
Inflation at the gas pump and elsewhere isn’t great for the American consumer. However, as more shoppers count on Costco for discounts in these challenging times, this should benefit the company and its investors.
This Portfolio Grader “A” rated stock offers dividend payments and the data shows that the company is in growth mode. So, feel free to go comparison shopping — you’ll still be hard-pressed to find a better all-weather investment than COST stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Louis Navellier had a long position in COST. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.