COST's 90% global membership renewal rate drives $1.4B in quarterly annuity-like fee income, growing 11% year over year.
COST outpaces WMT with 12% revenue growth and a higher 29% return on equity for only a modest P/E premium.
Gary Millerchip signaled a special dividend remains possible as Costco's cash surged 37% to $19B year over year.
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Costco (NASDAQ:COST) stock stands out as one of the strongest setups in the retirement investor's playbook right now, and the case rests on three numbers that are hard to argue with. The membership economics are hardening, the balance sheet is getting stronger by the quarter, and the growth premium versus the obvious alternative keeps widening. This is a conviction position.
Costco posted Q3 FY2026 revenue of $70.53 billion, up 11.58% year over year, with net income climbing 15.19% to $2.19 billion. Membership fees alone reached $1.37 billion, up 10.7%, with a worldwide renewal rate of 89.7% and 75.0% executive-tier penetration. That is annuity-like income growing at a double-digit clip, the kind of cash-flow profile retirement portfolios tend to prize behind an equity position.
Cash and equivalents jumped to $18.95 billion, a 36.93% year-over-year gain, while shareholders' equity expanded 23.54%. CFO Gary Millerchip signaled that a special dividend remains on the table, noting Costco continues to "generate excess cash beyond those priorities". Costco has paid special dividends of $15 in 2023, $10 in 2020 and $7 in 2017. The regular quarterly dividend already stepped up to $1.47 in May 2026 from $1.30. Retirees get a growing base payout plus periodic lump-sum surprises.
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Walmart (NASDAQ:WMT) is the natural comparable, and it loses on the metrics that matter for a compounder. Walmart's quarterly revenue grew just 7.3% versus Costco's 11.58%, and quarterly earnings growth was 19.4% against Costco's 15.19% off a much larger base. Costco's return on equity is 29.1% versus Walmart's 24.1%.
Yes, Walmart yields 0.85% to Costco's 0.57%, but Walmart trades at a forward P/E of 38x versus Costco's 42x. That is a small premium for meaningfully faster growth and a membership annuity Walmart cannot replicate.
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