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Costco Wholesale Corporation (COST - Analyst Report) is an intriguing option for investors seeking both growth and income. This warehouse retailer announced its decision of a dividend hike, reflecting its plan of utilizing free cash to enhance shareholders’ return, thereby boosting investors’ confidence in the stock.

The Issaquah, WA-based company, raised its quarterly dividend by 14.5% to 35.5 cents (or $1.42 annually) from 31 cents a share (or $1.24 annually). The increased dividend will be paid on May 30, 2014, to stockholders of record as of May 16. The dividend yield based on the new payout and the last closing market price is approximately 1.2%. In Apr 2013, the company last increased its quarterly dividend by 12.7% to 31 cents.

Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies try to win investors, thereby persuading them to either buy or hold the scrip instead of selling them.

Investors prefer an income generating stock and a dividend paying stock is always a preferable option. People looking for regular income from stocks are most likely to be inclined toward those companies that have a track record of consistent and incremental dividend payment.

Other companies that recently increased quarterly dividend include Apple Inc. (AAPL - Analyst Report) and SunTrust Banks, Inc. (STI - Analyst Report). The companies raised their dividends by 8% to $3.29 and 100% to 20 cents, respectively. Another company, MetLife, Inc. (MET - Analyst Report) recently hiked its dividend by 27% to 35 cents.

Costco continues to be a dominant retail wholesaler based on the breadth and quality of merchandises it offers. The company’s strategy to sell products at heavily discounted prices has helped it maintain positive growth amid the beleaguered economic conditions as budget-conscious customers continue to see it as a viable option for low-cost necessities.

However, Costco currently holds a Zacks  Rank #4 (Sell) that highlights its negative earnings surprises in the last 4 quarters — 10.3% and 5.9% in the second and first quarters of fiscal 2014, respectively, while 4.1% and 1.9% in the fourth and third quarters of fiscal 2013, respectively.

Costco currently operates 652 warehouses, comprising 463 warehouses in the United States and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 19 in Japan, 10 in Taiwan, 10 in Korea and 5 in Australia.

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