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Costco Wholesale Corporation (NASDAQ:COST) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that...
Bulk-buying, bargain-hunting shoppers propelled Costco Wholesale (NASDAQ: COST) to a record-breaking 2024 for sales and earnings. Let's discuss what to do with shares of Costco Wholesale.
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Thus the key date for a stock purchase is the ex-dividend date: a purchase on that date (or after) will be ex (outside, without right to) the dividend. If, for whatever reason, a share transfer prior to the ex-dividend date is not recorded on the register in time, the seller is obligated to repay the dividend to the buyer when he receives it.
The ex-dividend date, i.e. the first date in which a new buyer of shares would not be entitled to the dividend, is the business day prior to the record date (see ex-dividend date for exceptions). In the case of a special dividend of 25% or more, however, special rules that are quite different apply.
For example, if stock X was bought for $20/share, it split 2:1 three times (resulting in 8 total shares), it is now trading for $50 ($400 for 8 shares), and it pays a dividend of $2/year, then the yield on cost is 80% (8 shares × $2/share = $16/yr paid over $20 invested -> 16/20 = 0.8).
As a result, Costco's stock trades at a pricey 60 times trailing earnings and 66 times free cash flow. The shares look costly next to big-box retailer Walmart and downright expensive next to Target.
A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex-dividend date, though more often than not it may open higher. [ 1 ]