Assessing the Viability of UPS's Upcoming Dividend Payment
United Parcel Service Inc (UPS, Financial) recently announced a dividend of $1.63 per share, payable on 2024-03-08, with the ex-dividend date set for 2024-02-16. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into United Parcel Service Inc's dividend performance and assess its sustainability.
What Does United Parcel Service Inc Do?
As the world's largest parcel delivery company, UPS manages a massive fleet of more than 500 planes and 100,000 vehicles, along with many hundreds of sorting facilities, to deliver an average of about 25 million packages per day to residences and businesses across the globe. UPS's domestic U.S. package operations generate around 64% of total revenue while international package makes up 20%. Air and ocean freight forwarding, truckload brokerage, and contract logistics make up the remainder.
A Glimpse at United Parcel Service Inc's Dividend History
United Parcel Service Inc has maintained a consistent dividend payment record since 1999. Dividends are currently distributed on a quarterly basis. United Parcel Service Inc has increased its dividend each year since 1999. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 25 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down United Parcel Service Inc's Dividend Yield and Growth
As of today, United Parcel Service Inc currently has a 12-month trailing dividend yield of 4.52% and a 12-month forward dividend yield of 4.55%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, United Parcel Service Inc's annual dividend growth rate was 17.10%. Extended to a five-year horizon, this rate decreased to 13.00% per year. And over the past decade, United Parcel Service Inc's annual dividends per share growth rate stands at 9.30%.
Based on United Parcel Service Inc's dividend yield and five-year growth rate, the 5-year yield on cost of United Parcel Service Inc stock as of today is approximately 8.33%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, United Parcel Service Inc's dividend payout ratio is 0.75. This may suggest that the company's dividend may not be sustainable.
United Parcel Service Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks United Parcel Service Inc's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. United Parcel Service Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and United Parcel Service Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. United Parcel Service Inc's revenue has increased by approximately 2.90% per year on average, a rate that underperforms approximately 56.28% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, United Parcel Service Inc's earnings increased by approximately 14.60% per year on average, a rate that underperforms approximately 46.92% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 12.80%, which underperforms approximately 43.14% of global competitors.
Next Steps
Considering United Parcel Service Inc's consistent dividend history and its status as a dividend aristocrat, the company's upcoming dividend payment appears to be in line with its track record. However, the sustainability of United Parcel Service Inc's dividends may be a concern given the payout ratio and mixed growth metrics. While the profitability rank is strong, the growth in revenue and earnings, as well as the EBITDA growth rate, are areas where UPS underperforms a significant portion of its competitors. Investors should weigh these factors when considering the long-term viability of UPS's dividend payments. For those seeking additional investment opportunities, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
