Costco’s Wide Moat: Saving Money Builds Loyalty

Costco Wholesale Corporation (NASDAQ:COST) is one of the Best Wide Moat Dividend Stocks to Invest in.

Costco’s Wide Moat: Saving Money Builds Loyalty

A customer in a warehouse aisles, browsing the wide range of branded and private-label products.

Costco Wholesale Corporation (NASDAQ:COST) stands out from other retailers in several key ways. One of its biggest strengths is its massive membership base. Over 130 million people pay an annual fee just to shop there. These members are highly loyal, with renewal rates typically exceeding 90%. Thanks to the steady income from these membership fees, Costco can operate with much lower profit margins than most competitors.

The company also keeps a limited range of products on its shelves, which gives it more leverage when dealing with suppliers. Vendors are aware that getting their products into Costco Wholesale Corporation (NASDAQ:COST) means facing less competition and benefiting from the trust shoppers place in the company’s product selection.

This bargaining power extends to payment processing as well. Unlike most major US retailers that accept a wide range of credit cards, Costco Wholesale Corporation (NASDAQ:COST) only takes Visa. In exchange for this exclusivity, the company enjoys significantly lower payment processing fees.

In addition, Costco Wholesale Corporation (NASDAQ:COST) is a strong dividend payer. The company has raised its payouts for 21 years in a row. Currently, it pays a quarterly dividend of $1.30 per share for a dividend yield of 0.52%, as of June 24.

While we acknowledge the potential of COST as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 10 Best Dividend Stocks for a Bear Market and 10 Best Dividend Stocks to Buy for Dependable Dividend Growth.

Disclosure. None.