Analysis: COST

Markets have closed for Monday, but we want to draw your attention to one big mover in after-hours trading. Shares of Costco (COST) are pushing higher, after the company said its board of directors has declared a special cash dividend on Costco common stock of $10 per share, payable Dec. 11, to shareholders of record as of the close of business on Dec. 2.

"This special dividend, our fourth in eight years, is our latest step to reward shareholders. Our strong balance sheet allows us to pay this dividend, while preserving financial and operational flexibility to continue to grow our business globally. Costco will continue to be in a financial position to take care of our employees, enhance the value of the Costco membership, and create shareholder value over the long term," CFO Richard Galanti, who is also executive vice president, said in the press release discussing the decision.

As a reminder, we have been anticipating a special dividend, ever since January when we first initiated a position in the wholesaler. We included the strong possibility of a special dividend in our initial investment thesis, because the company had plenty of cash on the balance sheet and the timing looked right with management previously paying a special cash dividend in fiscal year 2013 ($7.00 per share), 2015 ($5.00 per share), and in fiscal year 2017 ($7.00 per share). And in each of those times when Costco declared a special cash dividend, investors embraced the decision with welcoming arms and this is something we pointed to in our Alert here.

In fact, if we look back at recent history, Costco shares have performed very well in the time period between the special cash dividend's Declaration Date and Pay Date. Analysts at Oppenheimer did a great job tracking the trading specifics in a research note from back in January 2020. See below for the specifics.

Source: Oppenheimer

Of course, this does not mean the same results will happen again, but COST is already off to a strong start with shares up around 1% to 2% in after-hours trading.

Action AlertsPLUS, which Cramer co-manages as a charitable trust, is long COST.