Depending on investing goals and the number of shares owned, one choice may make more sense than the other.
Depending on investing goals and the number of shares owned, one choice may make more sense than the other.
Shareholders of Costco Wholesale (COST +1.14%) can look forward to some dividend payouts heading their way soon. The dividend of $1.47 per share will be paid out on Nov. 13 to shareholders of record at the close of business on Oct. 30.
When that time comes, shareholders will have a decision to make. They can either take the dividends as income, or use them in a dividend reinvestment plan (DRIP), which purchases more Costco shares. Depending on your investing goals, one may make more sense over the other.
Why establishing a Costco DRIP makes sense
The power of a DRIP is that investors can use dividends to increase their stakes in a company without using their personal funds. For a stock like Costco, having additional shares can help build a larger position that can compound into meaningful returns, given its stock price appreciation potential. For example, over the last five years, as of this writing, Costco shares are up 117%, compared with the S&P 500's 72.6% return.
When Costco pays its $1.47-per-share dividend, if an investor's account is enrolled in a DRIP, the funds will be used to purchase additional shares. Costco has also paid a special dividend every few years, with the last payout of $15 per share in 2024. When that special dividend is paid out, if an account supports a Costco DRIP, the dividend will also purchase additional shares.
Using the dividend to automatically purchase shares would make the most sense for someone with a significant number of shares, as well as for someone with many working years ahead. That type of individual may not need the income right now, and they could just use the DRIP to build a larger position. Then, when they are ready to retire, they could just turn off the DRIP and collect the dividend payouts for income.
COST Costco Wholesale
$989.11+$11.10 (+1.14%)
NASDAQ · As of 4:00 PM ET 10/16/26
Averytin News Financial update.