Costco Has Raised Its Dividend Every Year Since 2004. Here Are 3 Reasons I'd Buy It in September and Never Sell.

There aren't many people betting against Costco (NASDAQ: COST) these days. Less than 2% of its shares are currently being sold short. It doesn't mean that there isn't a bearish argument to be made. The stock isn't cheap, with the warehouse club operator trading at 47 times trailing earnings. Net sales rose 10.2% for the fiscal year that ended over the weekend, but that follows three years of single-digit top-line growth.

This may seem like an odd way to start a bullish piece on Costco, but I figured I would lay out the bearish thesis before pivoting to the bullish camp. As a longtime Costco shareholder, I am naturally optimistic about the chain. I also think now is a good time to invest in the industry leader. Let's go over three reasons why this is a great month to warm up to Costco.

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1. Earnings season is here

A single quarter shouldn't matter for long-term Costco stock investors, but let's start by circling Sept. 24 on the calendar. It's the day that Costco reports its fiscal fourth-quarter results. There isn't much mystery about the top line. Costco publishes its sales shortly after the end of every month. On Wednesday, we learned that net sales for the 16-week fourth quarter rose 11.3% to $93.9 billion.

Costco's registers are perpetually busy tending to long lines of members, but how much of those net sales made it down to the bottom line? Analysts see earnings per share rising 12% to $6.56 for the quarter. Costco has landed marginally ahead of Wall Street's quarterly profit targets for more than a year. I like the chain's chances of moving higher after the report.

2. Special events

Costco's yield of 0.6% isn't going to be a dinner bell for income investors, but Costco spices things up with special one-time distributions to return more of the money it's been amassing to its shareholders. Why am I making a point of bringing up this irregular payout? Check out the timeline of all five of Costco's special dividends over the years.

• Dec. 27, 2023: $15 a share
• Dec. 1, 2020: $10 a share
• May 8, 2017: $7 a share
• Feb. 5, 2015: $5 a share
• Dec. 6, 2012: $7 a share

It has never been more than three years between the declared distributions. The last two times it has happened near the end of the year. History suggests a large payout -- potentially $20 a share, if not more -- is coming later this year.

3. Reversion to the mean

Costco has delivered generational wealth to long-term investors. The stock is a 146-bagger since its 1993 IPO. The market rewards steady performers, and Costco is a beating drum. It has only skipped a beat once, generating positive net sales growth in 32 of its 33 years as a public company.

Now is probably a good time to revisit the stock chart you saw earlier. Costco has looked pretty flat over the past year. It's actually trading 3% lower over the past year. It has doubled over the past five years, but its recent underperformance isn't the norm. It's the opportunity. This historically safe stock bounces back. It should do so again, soon.

Rick Munarriz has positions in Costco Wholesale. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.