Key Points
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Walmart and Costco have trailed the broader market over the past year.
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Both retailers boast nearly flawless sales records over the last three decades.
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Valuations are steep, with Walmart trading at 32 times and Costco at 41 times next year’s projected earnings.
Both Costco (NASDAQ: COST) and Walmart (NASDAQ: WMT) are consumer staples giants offering household essentials at competitive price points. This value proposition remains highly appealing during both prosperous economic times and periods of financial strain.
Furthermore, these retail leaders are reliable engines for dividend growth. Costco has raised its distributions 22 times since establishing its quarterly payout policy. Meanwhile, Walmart stands among an elite group of Dividend Kings, having increased its dividend for at least 50 consecutive years, a streak it extended to 53 years earlier this year. Which of these resilient stocks presents the smarter opportunity for the remainder of 2026? A closer examination reveals the answer.
Image source: Getty Images.
The Case for Walmart
The retail empire founded by Sam Walton from a modest Arkansas five-and-dime store has grown exponentially. Walmart held the title of the largest U.S. company by trailing annual revenue for 13 years before Amazon surpassed it earlier this year.
Growth remains steady, though modest. The company has posted just one fiscal year of declining revenue, and that slight 0.6% dip in 2015 was a rare anomaly. However, double-digit revenue growth has been elusive for two decades.
Walmart serves as a cornerstone for roughly 40 million daily shoppers. With over $735 billion in trailing sales, it functions as a retail titan with inherent recession resistance.
The Case for Costco
Paying an annual membership fee to save money might seem counterintuitive, but that is the premise of Costco. This warehouse club operator is a bellwether for bulk-packaged value. While Walmart’s Sam’s Club competes in this space, Costco’s 924 big-box stores and bustling customer traffic are unmatched.
Similar to Walmart, Costco has achieved positive net sales growth in 32 of the past 33 years. Both retailers can be confidently categorized as safe-haven stocks, compensating for their minimal markups through high product turnover volumes.
The Final Verdict
Like many stocks with generational wealth, both Walmart and Costco have seen their valuations outpace their growth and dividend increases. Therefore, neither is purchased primarily for its income yield. Walmart yields less than 1%, while Costco yields just 0.6%, though Costco’s occasional substantial one-time distributions provide notable passive income.
Neither stock is inexpensive based on earnings. Costco trades at 47 times trailing net income compared to Walmart’s 37 times. While Costco commands the higher valuation, it has earned it through faster growth. In the latest quarter, Costco’s net sales climbed 9%, driven by a 7.9% surge in comparable sales, whereas Walmart’s revenue grew 6% with a 3.1% comp increase in its U.S. stores.
Both companies are iconic, boasting robust economic moats in a fiercely competitive retail landscape. Their underperformance over the past year—Walmart up just 7% and Costco down 2%—is not a flaw but an opportunity. For the final four months of 2026, Costco is the smarter buy. It possesses stronger sales momentum and a more differentiated market advantage. It is time to go shopping.
