Investors Love Costco Stock. But Its Smaller Rival Is a Better Buy Right Now.
Investors love warehouse chain Costco Wholesale (NASDAQ: COST), and for good reason. This well-managed business consistently keeps its prices low for its members in spite of inflationary headwinds. And for its efforts, it's rewarded with loyalty from its members and high-margin recurring revenue from its membership fees.
This consistent source of profits allows Costco's management to reward shareholders on a regular basis. One of its preferred methods is paying a growing dividend. It's paid and increased its dividend for 19 straight years, and I expect this streak to continue for decades to come.
But if there's one knock on Costco stock, it's its valuation -- the stock is expensive. At 50 times trailing earnings right now, Costco shares trade at almost a 50% premium to the 10-year average for their valuation, as the chart below shows.
Source Fool.com
