Costco Unveils Special Per-Share Dividend of $7; Stock Rises

First Published Wednesday, 28th November 2012 01:58 pm - © 2012 Dow Jones


--Retailer plans to offer up to $3.5 billion in debt

--S&P removes ratings from credit-watch positive

--Credit ratings firm cites revised view of Costco's financial risk profile

(Adds Standard & Poor's removal of credit-watch positive in paragraphs three through six. Updates share price in paragraph two.)

By Tess Stynes

Costco Wholesale Corp.'s (COST) board approved a special dividend of $7 a share, as the wholesale-club operator joined a number of companies making payouts to shareholders in anticipation of potential tax increases in the new year.

Shares were up 3.9% at $100.25 in recent premarket trading. Through Tuesday's close, the stock is down 7.6% from an all-time high in October.

Standard & Poor's Ratings Services removed Costco's investment-grade ratings off of credit watch amid the retailer's plans to offer as much as $3.5 billion of senior unsecured notes to fund the special dividend. According to S&P the debt issue includes three series that mature in three years, five years and seven years.

The credit ratings company affirmed Costco at A-plus, or six notches above junk territory, with a stable outlook.

S&P had placed Costco on credit watch with positive implications during August as it revised its outlook on the company's financial risk profile to minimal from modest.

On Wednesday, S&P said its latest ratings action comes as its view of Costco's financial risk profile reverted to modest from minimal on the plan to use debt to fund the dividend.

The dividend increase also came as the company reported that its November same-store sales increased 6%, topping recent estimates of analysts polled by Thomson Reuters for 5.4% growth.

The special dividend is expected to cost the retailer an estimated $3 billion. Costco plans to provide more details about the special dividend during a conference call Wednesday at 10:30 a.m. EST.

The company in October reported that its fiscal fourth-quarter earnings rose 27% as higher membership fees helped to improve margins. Costco plans to release its fiscal first-quarter results Dec. 12.

Write to Tess Stynes at Tess.Stynes@dowjones.com

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