A special COST you should love

No one loves any cost I’m sure but I’m also sure you probably will love this cost! I’m not talking about any expense here of course, it is the stock symbol, COST, for Costco! Costco is a great business, a rare retailer that has not been driven down by Amazon. On the contrary, it has been thriving while facing fierce e-commerce competition led by Amazon. I have been watching Costco for several years, patiently waiting for a cheap moment to get in for long term but it seems I’d never get this kind of moment. It has been simply going up. Unless there is a huge overall market correction or collapse, I don’t see the chance that it will really go on sales. Last year I did something a value investor should not have done that I just bought some shares of Costco, knowing it was not a good valuation that I got. But I simply wanted to have some of it. Well, it is not a bad decision as it turned out since COST has continued to go up since I bought. Using covered calls, I’ve also got some extra income from time to time to gradually reduce my cost. Now Costco makes me even more happy as it has announced to distribute a huge special dividend, $7/share, in addition to its regular dividend. For shareholders, this is a great bonus. But I plan to boost the bonus by myself for this special Costco treat: this is a great time to do special covered calls for dividend purpose. I have introduced this idea a few years ago and you can read here to learn how to do it if you also want to try.
  

A couple of things to remember though: There is only a very short time window to do this as the ex-dividend date is May 8, the coming Friday. In other words, in order to be qualified for this special dividend, you must hold the COST shares at least on Thu, May 7. If you like, you can sell your shares the next day but will still get the dividend. But here is an important trick to know: given the fairly large amount for the dividend, the COST share price will also be adjusted to decline by about $7 on Friday. Short term it is a wash, therefore it is usually not a good idea for those short-term traders. Longer term, good stocks like COST will likely come back to overcome this artificial decline. If you like Costco and would like to hold it for long term, this should be a great opportunity for you to get your feet wet. For me a frenetic dividend reinvestment lover, I’d like to get more to boost my shares of COST as the big special dividend will add a lot more than the regular dividends to my share count! Near term you won’t feel much about the difference but over a long haul, it could mean tens of thousands of differences for your wealth! Time to love COST!