Costco Wholesale Corporation (NASDAQ: COST) is not a cheap stock, and it has been trending at all-time highs, begging the question: How high can it go? The Q1 results, cash flow, balance sheet and the special dividend it allows suggest higher, much higher. While it is the premium stock in retail and membership clubs, it is also the premium producer of cash flow and free cash flow worth every penny you pay. Costco has been building a tidy hoard of cash for the last two years since it announced the last special dividend in Q4 2021. This time, the payment is worth $15 per share to investors or more than 2.25%, with shares trading near $650. .
Equity markets advanced following as-expected inflation data and a shift in Fed policy. The Fed indicated rate cuts are likely in 2024, marking the top of the rate hiking cycle. The bad news is that inflation continues to run hot so higher-than-normal interest rates will persist for some time. Even with the 75 basis points of cuts indicated, the market will end the year with rates at 4.5% or higher and double the rate going into the COVID-19 pandemic.
The S&P 500 is moving higher, and a Santa Claus Rally is likely; this week's PCE price index is a likely catalyst for the bulls. The risk is that markets remain below critical resistance at the all-time high which might cap gains for this year and next. However, if the S&P 500 can move above the all-time and sustain it through January, the odds are high that the market will continue to rally in 2024.
Costco Wholesale Corporation (NASDAQ: COST) is not a cheap stock, and it has been trending at all-time highs, begging the question: How high can it go? The Q1 results, cash flow, balance sheet and the special dividend it allows suggest higher, much higher. While it is the premium stock in retail and membership clubs, it is also the premium producer of cash flow and free cash flow worth every penny you pay. Costco has been building a tidy hoard of cash for the last two years since it announced the last special dividend in Q4 2021. This time, the payment is worth $15 per share to investors or more than 2.25%, with shares trading near $650.
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