The DivGro Weekly—29.12.23
148 Consecutive dividend increases
This week we received further real-time, tangible evidence of outstanding business progress when we collected our quarterly dividend from Domino's Pizza and became entitled to our quarterly dividends from American Tower and Stryker, all much higher than this time last year. Notably, we also became entitled to our giant Costco special dividend.
Since DivGro's inception we have predicted and benefited from 148 consecutive dividend increases across our portfolio companies. The average rate of these dividend increases is 15%.
Costco highlighted its formidable dividend prowess by announcing a $15 special dividend - equivalent to almost 4 years(!) of its ever-increasing regular dividends. Earlier in DivGro's journey, Costco already rewarded us with a $10 special dividend, equal to nearly 5 years of its (then) regular dividend which has grown substantially. This latest dividend largesse coincides with Ron Vachris taking over the CEO helm, becoming only the third CEO in Costco's history. In true Costco style, Vachris started at Costco 40 years ago driving a forklift, providing us confidence of an intimate mastery of the business from the ground up. Costco's CEO salary is lower than at rivals Walmart and Target, but total compensation tends to be far higher over time, because of the upwards escalation of Costco shares, in alignment with us. Meanwhile, Costco's median employee earns more than double that of rivals Walmart and Target, driving significantly lower employee turnover at Costco, another important competitive edge. By intensely focusing on key details, such as employee behavior and incentives, Costco is outstandingly positioned to extend its superb dividend growth trajectory, having increased its dividend at an average compounded rate of 13% per year since 2004 (plus very significant special dividends, such as this one).
We discussed Costco in a recent interview on ausbiz. We covered some of what makes Costco so special, and why it outperforms its significantly bigger competitor Walmart. Click here to access the interview.
