Costco's Cash Pile Is Building. Is a Special Dividend Coming in the Second Half of 2026?

Costco Wholesale (NASDAQ: COST) isn't a very exciting name among most dividend investors. When passive income matters, Costco Wholesale's 0.6% dividend yield just isn't going to move the needle unless you're sitting on a mountain of shares.

But don't underestimate Costco's ability to put cash in your pocket. The company has paid out special dividends over the years. Special dividends are discretionary, and Costco doesn't pay them every year, but when it does, they can pack a punch. Costco is one of the world's largest and most successful retailers, and the cash is piling up once again.

Here's why it's starting to look like Costco Wholesale stock could announce its next special dividend later this year.

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It's about that time again

Costco doesn't really throw its money around. It doesn't spend much buying back its stock and isn't known for acquiring other companies. Even the quarterly dividend only costs about a quarter of Costco's free cash flow. As a result, much of the cash the business generates winds up accumulating on the balance sheet. Then, every few years, management sends a chunk of that cash to shareholders as a special dividend.

The company announced its previous two special dividends late in the year, a few months after wrapping up its fiscal year at the end of August. Those special dividends were during years when Costco's cash holdings reached new highs. Costco currently has $20 billion in cash, a new all-time high, so the pattern would hold if the company announced a new special dividend later this year.

Analysts even asked Costco about its cash levels during its third-quarter fiscal year 2026 earnings call, and management acknowledged that it's something on their radar. It can seem silly, but paying a smaller quarterly dividend along with an occasional special dividend gives management far more financial flexibility than consistently sending more of its cash flow out the door.

Special dividends are a significant part of Costco's dividend appeal

There's no rule about how much a special dividend should be, but Costco tends to be very generous.

Costco paid its last special dividend in January 2024. It paid the one before that in December 2020, roughly three years apart. Remarkably, Costco's special dividend in 2024 was $15.00 per share, far more than the cumulative $11.54 in quarterly dividends investors received for holding the stock from December 2020 until January 2024. Yes, the special dividends matter a lot to Costco shareholders.

It's enough to easily double the stock's typical dividend yield. Is that enough to win over high-yield investors? Probably not. It does give Costco, which has averaged a dividend yield of 0.78% over the past decade, a more respectable yield that might appeal to more investors.

Why Costco doesn't need a juicy yield to shine as a dividend stock

It's important to consider how Costco's dividend growth can contribute to the stock's long-term returns. Costco may not offer a high dividend yield, but the company has raised its quarterly dividend for more than two decades. Investors shouldn't underestimate how steady increases can affect numbers over a couple of decades.

Costco's quarterly dividend was only $0.13 per share back in 2006. Today, the quarterly dividend is $1.47, more than 11 times what it was back then. Plus, the payout ratio is still very low, so the dividend has plenty of room to grow. When you factor in dividend reinvestment of quarterly and special dividends over the past 10 years alone, the stock's total returns jump from 505% to 617%. Dividend income and price appreciation don't need to be mutually exclusive.

Investors should be optimistic about a special dividend later this year, as well as Costco's ability to continue delivering for investors for years to come.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.