Will Costco Stock Split?

When Was the Last Time Costco Stock Split? The last time Costco stock split was on January 13, 2000. At the time, shares were trading for about $45.

While that doesn’t seem like an incredibly high price, share values had nearly doubled over the previous year. The rapid increase convinced Costco’s leadership that it was a good time to split the stock to attract more investors. It was a 2-for-1 split, so investors who already owned stock in the company saw their number of shares double.

How Often Does Costco Stock Split?

Costco doesn’t split its stock very often. The last time was more than two decades ago.

Before the 2000 stock split, Costco had a 3-for-2 split in 1992 and a 2-for-1 split in 1991.

From these dates, you can see that Costco splits infrequently and doesn’t follow any kind of established timeline. More likely than not, it makes the decision to split its stock based on performance instead of time. 

Will Costco Stock Split Soon?

At the beginning of 2019, you could buy a share of Costco stock for about $210. By Q1 of 2022, Costco shares traded at about $550. If it maintains this upward trajectory, the value could triple before the end of the year.

If you go back a couple more years, you see that share values have tripled. This makes it likely that Costco will split its stock soon. Actually, it’s a little surprising that the company hasn’t already committed to a stock split. 

Many investment professionals predicted a Costco stock split in 2021. After all, the company has split its stock before while experiencing significantly slower growth. 

So, why hasn’t Costco split its stock?

We can only make educated guesses about the leadership’s thinking. It’s possible that management has adopted a Warren Buffett-style philosophy of not splitting stock. The idea is not to attract more shareholders but to incentivize those that do own shares to hold long-term. Since Charlie Munger, Buffett’s right-hand man, is a huge proponent of Costco, it’s possible he has influenced management to not split COST shares.

Another factor may be Costco’s dividend payouts. Quarterly payouts have been growing since at least 2004 (the latest year included in Costco’s investor’s webpage). In 2004, quarterly payouts were 10 cents. That number has slowly increased over the years. The first quarter of 2021 paid investors 70 cents per share. The next quarter, that amount increased to 79 centers. 2022’s first quarter also has a 79-cent payout. It looks very much like next quarter’s dividend will be somewhere around 85 cents.

High dividend payouts make companies look very attractive to current and potential investors. The company’s board members and executives might see higher dividends as more attractive than lower share prices.    

A third possibility is that Costco wants its share price to reach $600, or even more, before splitting its stock. Why would Costco want to wait until its stock reaches a higher number?

Potentially because that would allow the company to offer a larger stock split. Instead of doing a 2-for-1 split, it could do a 5-for-1 or 10-for-1 split. By taking this path, investors would have shares more in line with prices from a decade ago. They would earn the same amount of money, but the lower price would make it easier for new investors to join.

Of course, this is all conjecture. Only the board members and executives at Costco know why they have not split the company’s stock or whether they will choose that option soon.

Is It Better to Buy Before or After a Stock Split?

In many ways, it doesn’t matter whether you buy before or after a stock split. So, why do so many investors get excited when they anticipate an upcoming split?

While a split doesn’t make current shareowners any immediate money, the company’s decision says several things. If Costco were to split its stock, it could mean that the company believes it has a lot of potential investors who want to buy shares but cannot afford the current price.  

At the current price (about $550 per share), a lot of people who want to buy Costco stock can’t afford to do so unless they sign up to a brokerage firm that facilitates fractional investing. If they do invest, they might only have enough money to buy a small number of shares. 

When you split stocks, the individual price of a share can fall dramatically. With a 10-for-1 split, shares would cost about $55 each. Practically any investor will have enough cash on hand to purchase 100 or more shares. 

Here’s where it could potentially benefit you to own stock before it splits. Once the split happens, more people will probably buy shares. Their increased interest should increase the value.

Maybe a $55 share becomes worth $60 by the end of the day. If you already owned shares, you effectively get in at the lowest possible price. Your shares will automatically split and retain their value.

As more investors rush to buy “inexpensively priced” shares, the stock you already own could grow in value. 

If this seems confusing, consider that the single pre-split share costs $550. After the split, the investor has 10 shares worth $55 each. When the value reaches $60, the 10 shares will have collectively earned the investor a $50 profit.

What Will Happen After Costco Stock Splits?

After Costco’s stock splits, existing shareholders will have more shares with lower prices but the same valuation, theoretically.

Let’s say Costco decides to initiate a 2-1 split when the share price reaches $600. Once the stock split happens, shareholders will own twice as many shares, but each share will be priced at half the amount it was before the split. If a shareholder currently owns 100 shares worth $600 each, after the split they would own 200 shares worth $300 each.

Keep in mind that companies don’t have to use a 2-1 split. In 2021, Apple initiated a 20-1 split. Each Apple share turned into 20 shares. In the past, Costco stock splits have usually doubled the number of available shares. The company has also used a 3-for-2 split, though. In that case, every two shares owned pre-split would turn into three shares post-split. 

Costco will probably split its stock at some point. When will that happen? It’s impossible to know until the company makes an announcement. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.