The stock is Costco Wholesale Corporation (COST), well known as one of the founders of the warehouse shopping movement.
Today, Costco is not only the largest warehouse club operator in the world, it’s also the second largest global retailer, based on worldwide sales of $116 billion. But with a market cap of just $72 billion, it lags far behind higher-profile retailers like Amazon (market cap of $364 billion) and Walmart (market cap of $220 billion) in investors’ perception of value—and that spells opportunity.
Plus, Costco has growth potential, not on the scale of Amazon, but substantial potential nevertheless.
Today, the company operates 723 warehouse stores, with 506 of those in the U.S., 94 in Canada, and the remaining 123 spread among Mexico, the U.K., Japan, Korea, Taiwan, Australia and New Zealand.
In 2017, the company expects to open 31 new warehouse stores, including 17 in the U.S. and seven in Canada and the first stores in France and Iceland.
In the fiscal first quarter of 2017, which ended October 29, Costco reported revenues of $27.5 billion, up 3% from the year before and earnings of $1.24 per share, up 14% from the year before.
Both numbers were slightly below analysts’ estimates. But the stock gapped higher in response!
And as I’ve told you many times, the action of the stock is paramount.
So, while the common wisdom is that Costco is lagging on the e-commerce front (true), the fact is that e-commerce is not the only game in town—as we saw recently when Amazon opened up its own brick and mortar, self-service stores.
Costco has certainly explored the idea of competing with Amazon in the online shopping arena, but concluded that its strength is serving the penny-pinching American family that wants to fill the SUV with groceries at bargain prices—and fill up the SUV at the gas pump, too.
And then there are the dividends (which Amazon doesn’t pay). Costco began paying dividends in 2004, and today, the stock yields 1.1%. Plus, the dividend is growing at a healthy rate of 13% per year.
So, you could buy COST here, hoping that the current uptrend will be the one that breaks out above resistance at 170.
Or, you could look for the next Costco.
You see, COST was originally recommended more than two years ago in Cabot Dividend Investor, when the stock was even more out of favor than now. But investors who followed our advice are now sitting on profits of 48%—and enjoying a yield on cost of 1.6%. Also, officially, Cabot Dividend Investor now has COST rated HOLD.
So what you really want is the next Costco—the next best retail stock.
For details on how you can get it in Cabot Dividend Investor, along with comprehensive advice on building your own dividend stock portfolio, click here, because you deserve a portfolio of healthy dividend growers in 2017.