Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Show Me the Money? Just Ask Costco

Thursday, November 29th, 2012
By for Profit Confidential

Show Me the MoneyIn spite of the sluggishness in many of the world’s largest economies, there are some companies that are doing well—so well, that they have more money than they can handle. One such company is Costco Wholesale Corporation (NASDAQ/COST), which was just in the news for reporting a substantial $7.00-per-share dividend to shareholders, on top of its regular quarterly dividend. The company just announced strong retail sales in the four weeks ended November 25, 2012, and its first fiscal quarter of 2013 experienced a solid 10% increase in revenues.

On the stock market, Costco has been a powerhouse wealth creator over time. You have to imagine that those annual memberships are pure gravy for the company; having to pay a company in order to shop there is such a score. On the stock market, the stock appreciated to $54.00 from $10.00 between 1996 and 2000 on a split-adjusted basis. Then it didn’t do much of anything for the next 10 years. (See “Beat The Market? There’s Only One Way to Do It.”) It’s only in the last year that the company’s stock market price has taken off, while the rest of the U.S. economy is sluggish. This time last year, the stock was worth about $68.00 a share; now it’s at $100.00.

COST Costco Wholesale Corp Nasdaq Stock Market Chart

 Chart courtesy of www.StockCharts.com

There are some tax reasons for the special $7.00-per-share dividend, but basically, the company is generating more cash than it can handle, so it’s returning some of that money to its shareholders. So many corporations are doing this. Rather than invest in new facilities, equipment, and employees, a company just returns the money to shareholders in the form of dividends or share buybacks. One-time dividends are very advantageous to a company, because they don’t lock it into a new quarterly dividend rate if times get tough.

Discount retailers have been doing great over the last several years. Consumers might not be buying too many high-end suits, but they still need business-casual clothes in the workplace. Companies like Target Corporation (NYSE/TGT), Wal-Mart Stores, Inc. (NYSE/WMT), and The TJX Companies, Inc. (NYSE/TJX) have all been outstanding wealth creators on the stock market in recent years. TJX has doubled on the stock market over the last two years.

  • Re: Lifetime Oil Pension Checks

    Oil Pension Checks could pay you up to eight-times more than Social Security and have no income or maximum age restrictions.

    The monthly checks can outlive you and continue to generate steady income for your heirs five, ten, even twenty years out.

    Oil companies do not advertise them; that's why most investors have never heard of the Oil Pension Check program.

    To activate your account and to get your own Oil Pension Checks coming in monthly...

    Click here now to learn more.

With low borrowing costs and very conservative business planning, many large-cap companies have built up huge cash positions. And this is why dividends have been increasing. The outlook for the stock market might not be that strong, but the outlook for dividend-seeking investors remains good.

Earnings growth is flat, but corporate balance sheets are in excellent condition. The stock market is likely to keep moving downward, so long as uncertainty remains regarding the fiscal cliff. As I keep saying, dividends are going to be your only friend in 2013 if you’re a stock market investor. There really isn’t any reason why share prices should go up.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.