Final answer:
Costco's strategy of timing share buybacks and special dividends aligns with historical shifts in the balance between dividends and capital gains as sources of shareholder returns. This reflects an adaptation to market trends and an effort to maximize shareholder value through different financial mechanisms.
Step-by-step explanation:
The timing of Costco's decisions on share buybacks and dividends appears to be strategic, reflecting changing market conditions and internal company performance. During 2005-2008, an increased amount of share repurchases might have been an attractive option due to the then-prevailing stock market conditions that allowed for potential undervaluation of Costco's shares or as a method to improve earnings per share. The special one-time dividends paid in 2013 and 2015 could have been a way for Costco to distribute excess cash to shareholders in a manner that was perhaps seen as preferential to regular dividends, possibly due to tax considerations for shareholders or as a supplementary income in periods of lesser stock price appreciation. This pattern resonates with the broader historical context where, according to Table 17.2 and other related sources, the average firm paid annual dividends amounting to about 4% of stock value from the 1950s to the 1980s. Since the 1990s, however, dividends have reduced considerably and have been complemented by capital gains, thus altering the balance between the two as a source of total shareholder return.