COST vs TGT: Dividend Comparison
Dividend data as of
Costco Wholesale Corp /New (COST) and Target Corp (TGT) are both in the Consumer Staples sector, making them natural rivals for dividend investors. TGT offers a significantly higher 4.01% yield compared to COST's 0.52%, a gap of 3.49%. For dividend growth, COST leads with a 5-year CAGR of 20.9% versus TGT's 9.4%. Both stocks carry a "Safe" dividend safety rating. TGT is a Dividend Aristocrat with 42 years of consecutive increases.
Verdict
Yield Analysis
TGT yields 3.49% more than COST. In dollar terms, COST pays $5.06/share vs TGT's $4.50/share annually.
Dividend Growth
COST: Dividend growth is slowing — the 3-year CAGR of -47.1% trails the 5-year rate of 20.9% and the 10-year rate of 15.8%.
TGT: Dividend growth is slowing — the 3-year CAGR of 1.8% trails the 5-year rate of 9.4% and the 10-year rate of 11.1%.
Dividend Safety
COST: The payout ratio of 27% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 3.7x.
TGT: The payout ratio of 55% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in COST vs TGT today?
At $1015.00 per share, $10,000 buys about 9.9 shares of Costco Wholesale Corp /New (COST). Each share pays $5.06 per year in dividends, so the position starts out generating roughly $50 per year — about $4 a month.
At $115.49 per share, $10,000 buys about 86.6 shares of Target Corp (TGT). Each share pays $4.50 per year in dividends, so the position starts out generating roughly $390 per year — about $32 a month.
TGT is the larger income stream from day one: $340 per year more on the same $10,000 invested.
What could $10,000 of COST or TGT income look like in 10 years?
Costco Wholesale Corp /New (COST) has raised its dividend about 20.9% a year over the past five years. If that pace held, the $52 per year that $10,000 generates today at the current 0.52% yield would reach $347 per year by 2036 — a 3.5% yield on the original cost.
Target Corp (TGT) has raised its dividend about 9.4% a year over the past five years. If that pace held, the $401 per year that $10,000 generates today at the current 4.01% yield would reach $982 per year by 2036 — a 9.8% yield on the original cost.
On those trailing rates, TGT pays more in 2036: $982 versus $347 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would COST's dividend growth overtake TGT's higher yield?
Costco Wholesale Corp /New (COST) yields less today (0.52% vs 4.01%) but has grown its dividend faster — 20.9% vs 9.4% a year over the past five years. If both trends continued, a $10,000 position in COST would start out-earning the same position in TGT around 2047 (roughly 21 years from now), paying about $2,794 per year at the crossover. Before that point, TGT pays more each year; after it, the gap compounds in COST's favor.
Can COST and TGT afford their dividends?
Costco Wholesale Corp /New (COST) earns $18.65 per share against $5.06 paid out in dividends — 3.7x coverage (a 27% payout ratio).
Target Corp (TGT) earns $8.25 per share against $4.50 paid out in dividends — 1.8x coverage (a 55% payout ratio).
COST's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for TGT if earnings weaken.
Which fits an early-retirement income portfolio better, COST or TGT?
For income you need right now, Target Corp (TGT) leads: $100,000 invested today pays about $335 a month at the current 4.01% yield, versus $43 a month from Costco Wholesale Corp /New (COST) at 0.52%.
With a decade or more before the income is needed, COST's faster dividend growth (20.9% vs 9.4% a year) matters more than the starting yield — raises compound into the larger paycheck over time.
On consistency: TGT has raised its dividend 42 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $366/yr in COST vs $1,456/yr in TGT by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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