2 Top Stocks That Look Ready for a Split

Stock splits are a common way to divide the investment pie so more people can buy into it. They don’t expand the pie or change its value, but they imply a stock that is in growth mode and has already attracted investors. Markets generally love them, and a stock can often jump on news of a split.

There have been many significant stock splits in recent years, including Nvidia And Chipotle Mexican Grill in June. What most important actions could follow? Costco wholesale (NASDAQ: COST) And MercadoLibre (NASDAQ: MELI) look like strong candidates.

Costco keeps getting better

Shoppers love Costco, investors love Costco, and there may not be many people who don’t. (Perhaps its competitors?) Its differentiated retail model attracts members, generates loyalty and volume, and is highly profitable.

Renewal rates have consistently been above 90% and millions of new members are added each year. Costco keeps its prices low and marks up products with low margins to attract shoppers and generate high sales, and the value it provides to its customers leads to satisfaction and repeat trips. Membership fees go directly to the bottom line, which continues to rise.

This has been the case for years, but it is all the more obvious as it involves tackling economic challenges one after the other without missing too many steps. As with other essential retailers, the start of the pandemic was a period of high growth. She managed to overcome supply chain problems by using her influence to create her own, and she was ultimately challenged by inflation when sales growth temporarily turned negative. But it’s back, and investors have flocked to this reliable value stock that also pays a dividend.

The dividend is not the highest or close to it, but it has attracted attention thanks to its special dividend program. It has paid a special dividend on average about every 2.5 years, most recently a $15 dividend last December.

Investors have been waiting for this announcement, and Costco also recently drew attention to another highly anticipated update: a fee hike. It increased its annual membership fee from $5 to $65 (or $10 for executive members) this month for the first time in seven years. This should improve results, although management says it uses the additional revenue from fees to reinvest to deliver even greater customer value.

Costco stock is a consistently market-beating stock, and it’s up 34% year to date. He hasn’t split his shares in almost 25 years and has gained 2,780% since then. The price is approaching a four-digit price, which could mean it’s time for the next split.

MercadoLibre Might Be the Best Ecommerce Stock You Can Buy

E-commerce isn’t really a buzzword anymore. Not only has it been around for a long time, but it accelerated during the pandemic and became completely mainstream. It’s unusual these days for a business not to have an e-commerce presence, and some businesses are all online.

MercadoLibre is an e-commerce powerhouse in Latin America and experiencing incredibly high growth. While these reached triple digits early in the pandemic, they have stabilized in double digits despite a host of challenges, from inflation to building high sales to serving some economically volatile markets.

There should be a lot more on the horizon. Its region is still highly cash-dependent compared to other regions in the world, and e-commerce is still under-penetrated. MercadoLibre is the leading e-commerce company in most of the countries it serves and is constantly updating its platform with improvements to delivery times and membership features.

Although the e-commerce business is seeing healthy growth, the company has launched a strong fintech business that is driving engagement and growing even faster. This segment started as a way for the underbanked population to gain access to its digital platform, but it has expanded into a large financial services company with credit and investment products. MercadoLibre is even getting into the banking business, with its first efforts targeting Mexico.

MercadoLibre has never split its shares in its 17 years as a public company, and it has gained 7,380% during that time. It trades at a 4-digit price, which is often grounds for stock splits. Management typically explains its decision to split its stock by saying that it wants to make the stock more accessible to employees who want to participate in a company-sponsored stock program, and four numbers might be quite restrictive.

So far, MercadoLibre hasn’t worried about a split, but it seems increasingly likely.

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Jennifer Saibil holds positions at MercadoLibre. The Motley Fool posts and recommends Chipotle Mexican Grill, Costco Wholesale, MercadoLibre and Nvidia. The Motley Fool recommends the following options: Short bet September 2024 at $52 on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.