Key Takeaways:
- UPS offers a high 6.7% dividend yield today.
- The business is under short-term pressure, but operational improvements could help earnings bounce back.
- Analysts think the stock has 30% upside today.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
UPS isn’t the kind of stock that makes headlines every day, but that’s exactly why it can be interesting for long-term investors.
With a massive global logistics network and 16 straight years of dividend growth, UPS has been a steady performer for dividend investors. Even though the company is facing some near-term challenges, management is committed to continuing to pay and grow the dividend.
Right now, UPS could be of the best dividend opportunities hiding in plain sight.
Why Has UPS’s Stock Dropped?
UPS’s stock is down over 30% in the past year, and a lot of that comes down to two big challenges:
- Fewer packages being shipped
- Higher operating costs
After the pandemic boom, online shopping cooled off, which means that UPS had fewer packages to ship. Naturally, that hit revenue growth.
At the same time, the company signed a new labor deal with the Teamsters union. It was a win for workers but added to UPS’s cost base just as global shipping demand started to weaken and shoppers became more cautious with their spending.
Still, this doesn’t look like a business in trouble. UPS is making strategic changes, streamlining its network, and putting more energy into high-margin areas like healthcare logistics.
If those bets pay off and demand starts to bounce back, UPS could be well-positioned for a comeback.
Find the best stocks to buy today with TIKR (It’s free) >>>
Analysts Think The Stock Has 30% Upside Today
Even with the recent pullback, Wall Street hasn’t lost faith in UPS.
Analysts’ average price target suggests the stock could climb about 30% from where it is today. That kind of upside reflects expectations for the business to recover, new product momentum, and better market sentiment over time.
Of course, analyst estimates aren’t always accurate. But, when the stock is trading below its historical valuation, the stock has the potential to unlock meaningful gains.
1: Dividend Yield
UPS is currently offering a dividend yield of about 6.7%, which is nearly the highest dividend yield the stock has offered in the past 5 years.
With shares trading at a discount and the yield sitting well above historical averages, this could be a rare moment to lock in a strong dividend from a business with long-term staying power.
Find high-quality dividend stocks that are even better than UPS today. (It’s free) >>>
2: Dividend Safety
At the end of 2024, UPS paid out about 84% of normalized earnings through its dividend.
We like to see stocks with a dividend payout ratio below 70%, so at first glance, it would look like UPS’s dividend is at risk. However, it doesn’t look like the stock’s dividend is in danger today.
First, management is targeting to pay out about 50% of earnings as dividends. That means they’re likely to let earnings continue to grow while barely increasing dividends so the payout ratio returns to a more reasonable level.
This is an excerpt from UPS’s Q4 2024 earnings call transcript from January 30th, 2025:
Check out UPS’s full earnings transcript (It’s free) >>>
Second, analysts expect earnings to grow about 10% annually after 2025. This earnings growth will likely reduce the payout ratio over time.
So, it doesn’t look like UPS’s dividend is in danger. Future dividend growth is likely to be low, as the company focuses on rebuilding its margins and stabilizing its bottom line.
See UPS’s full growth forecast. (It’s free) >>>
3: Dividend Growth Potential
UPS has a solid history of boosting its dividend and while that’s expected to continue, it will probably raise the dividend at about 0.5%-2% annually for the next several years.
Management has made it clear they’re prioritizing smart capital allocation. That means growing the dividend carefully while still investing in operations and protecting the balance sheet.
Steady, sustainable dividend growth beats aggressive dividend growth that can’t be maintained. If earnings recover as expected, there’s room for dividend growth to pick up again down the road.
TIKR Takeaway
UPS is in a tough stretch but it’s far from being out of the game.
With a strong yield, a long history of dividend increases, and a potential rebound story driven by efficiency gains, this stock might deserve a second look from dividend-focused investors.
The TIKR Terminal offers industry-leading financial data on over 100,000 stocks and was built for investors who think of buying stocks as buying a piece of a business.
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
