UNITED PARCEL SERVICE-CL B (NYSE:UPS) - A Strong Dividend Stock with Solid Fundamentals

UNITED PARCEL SERVICE-CL B (NYSE:UPS) stands out as a compelling choice for dividend investors, according to our screening criteria. The company combines a high dividend yield with strong profitability and reasonable financial health, making it a candidate worth examining for income-focused portfolios.

Key Dividend Strengths

• Attractive Yield: UPS offers a 6.54% dividend yield, well above the industry average of 3.92% and the S&P 500’s 2.40%.
• Reliable Track Record: The company has consistently paid dividends for over 10 years and has not reduced payouts during that time.
• Dividend Growth: UPS has increased its dividend at an average annual rate of 11.18% over the past five years.

Profitability Supports Payouts

UPS earns a Profitability Rating of 8/10, reflecting strong financial performance:

• High Margins: Operating margin (9.48%) and profit margin (6.44%) rank among the top in the air freight and logistics industry.
• Solid Returns: Return on equity (37.39%) and return on invested capital (12.73%) outperform most peers.

Financial Health Considerations

While UPS has a Health Rating of 5/10, indicating moderate financial stability, there are positive aspects:

• Manageable Debt: The company’s debt-to-equity ratio (1.25) is lower than many industry competitors.
• Cash Flow Strength: A debt-to-free-cash-flow ratio of 3.98 suggests UPS can comfortably service its obligations.

One concern is the high payout ratio (92.20%), meaning nearly all earnings go toward dividends. Investors should monitor whether future earnings growth can sustain this level.

Valuation

UPS trades at a reasonable P/E ratio of 13.01, below both the industry and S&P 500 averages. This suggests the stock is not overpriced relative to earnings.

For more details, review the full fundamental analysis of UPS.

Our Best Dividend Stocks screener provides additional high-quality dividend stock ideas.

Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.