15 Dividend Stocks With Low Payout Ratios and Strong Upside

3. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 88

5-Year Average Payout Ratio: 26.7%

Upside Potential as of December 24: 32.1%

Costco Wholesale Corporation (NASDAQ:COST) is among the best dividend stocks to invest in.

On December 24, Northcoast upgraded Costco Wholesale Corporation (NASDAQ:COST) to Buy from Neutral and set a $1,100 price target. Analyst Chuck Cerankosky pointed to Costco’s strong competitive position in the US, along with clear room to expand overseas. He said the company’s international growth, from South Korea to Sweden, has been “consistently successful.”

“Developed economies contain consumers who love to save money and in turn spend it on discretionary merchandise. Members can do both inside a Costco club,” Cerankosky adds. For existing shareholders, the balance sheet matters just as much. Cerankosky highlighted Costco’s cash reserves, noting they give the company flexibility to pay another special dividend, potentially as high as $20 per share.

The stock is down more than 4% since the start of 2025. Management addressed some near-term concerns during the first-quarter earnings call. Membership sign-ups slowed, largely because younger customers tend to sign up online and renew at a slower pace. It’s a shift in behavior, not necessarily a loss of interest.

Costco Wholesale Corporation (NASDAQ:COST)’s sales trends tell a different story. The company posted record Black Friday non-food orders, topping $250 million. Digital sales rose 20.5% for the quarter. Website traffic increased 24%, while mobile app traffic jumped 48%. Those numbers stand out.

Costco Wholesale Corporation (NASDAQ:COST) runs membership-only warehouse clubs. It sells bulk, brand-name, and private-label products, including Kirkland Signature, at low prices to both businesses and individual shoppers.