Will Costco Treat Investors to Another Special Dividend in 2026?

Costco Wholesale (NASDAQ: COST) is serious about rewarding shareholders. Since 2004, the retail giant has raised its dividend by 1,200%, easily outstripping the 75% inflation in that period. It's also spent $12.5 billion in share buybacks since 2000, including $903 million in share repurchases over the last fiscal year. Share buybacks are shareholder-friendly because they boost earnings per share by lowering the share count, helping to push stock prices higher.

The company typically announces dividend increases in the spring, so its 22nd payout hike is likely just weeks away. But Costco might have a much bigger treat in store for shareholders.

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Costco could pay a hefty special dividend this year

Since 2013, Costco has paid five special dividends. These payouts are unpredictable, but have two things in common.

First, they're huge. In January 2024, Costco paid out a special dividend of $15 per share, which was 1,370% larger than the regular dividend that shareholders also received a month later. To give this payout more context, Costco shares closed at $607.92 the day before this special dividend was announced. For shareholders who happened to buy just before the announcement, the special one-time dividend amounted to a one-time yield of 2.4%, or more than double what the average S&P 500 company pays out in two years.

Costco's other special dividends have also been immense. In 2020, its special dividend was 1,328% greater than the regular quarterly dividend, while 2017's special dividend was 1,300% greater than the regular quarterly dividend that year. In 2015, the special dividend was 1,308% greater than the quarterly payouts that year.

As you can see, management likes to make these payouts at least 14 times greater than the quarterly dividend. And consider how shares can rally when these juicy payouts are announced. In the five trading sessions after the 2023 special dividend was announced, shares rallied 8% as investors made sure they were in line for the imminent payout.

Secondly, special dividends are announced when times are good. That's intuitive, since management would want to preserve resources when the company's facing headwinds. In the month before its 2020 special dividend, for instance, Costco -- which reports results monthly, not just quarterly -- reported net sales growth of 17% year over year. In the quarter before its 2023 special dividend, management announced net sales growth of 15.2% year over year.

In its most recent earnings report for the fiscal first quarter of 2026 (ended Nov. 23, 2025), net income grew 13.6% year over year, while income from its membership programs grew 7.3% year over year, excluding the impact from a membership fee hike and foreign exchange rates. Costco now has 81.4 million paying members, and 145.9 million cardholders, totals that are up 5.2% and 5.1% over the last year, respectively.

Why Costco could issue a special dividend in 2026

Costco has bought back millions of shares since its January 2023 special dividend, repurchasing nearly 2 million shares in 2024 and 2025. In the 2023 fiscal year, it repurchased hundreds of millions of shares. Share repurchases make dividends easier to issue, since that's 2 million fewer shares to pay dividends on.

Secondly, the company's payout ratio, or the percentage of net income spent on its regular dividend, is down sharply from the time of its 2020 special dividend, and in line with its levels when the January 2023 special dividend went out. A lower payout ratio gives management much more breathing room to mail out more cash.

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Finally, the company's net cash flow from operations has surged to $14.76 billion. That's around triple its level at the time of 2020's special dividend, and more than double what it was in January 2023. That's important because this is the money management can dip into for buybacks, acquisitions, or dividends without going into debt.

Given all this, I believe another special dividend this year would be a layup for management, though time will tell. But given the value that Costco showers on shareholders each year, special dividend or not, I would rather be years early for a special dividend than one day too late.

William Dahl 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.