5. United Parcel Service, Inc. (NYSE:UPS)
Consecutive Years of Dividend Growth: 22 Years
United Parcel Service, Inc. (NYSE:UPS) is an American multinational shipping and supply chain management company offering its consumers various related services. The company has encountered difficulties adjusting to a shifting business landscape, marked by declining shipping demand and rising inflationary pressures. The CEO pointed to a slowdown in manufacturing and industrial production. However, the company plans to focus on expanding more profitable deliveries in targeted sectors like healthcare and small and medium-sized businesses (SMBs). Despite this focus, challenging market conditions have led customers to opt for more affordable delivery options, resulting in UPS experiencing significant growth in lower-margin deliveries. The stock has fallen by over 14% since the start of 2024.
These challenges, however, did not stop United Parcel Service, Inc. (NYSE:UPS) from delivering strong earnings in the most recent quarter. The company reported revenue of $22.2 billion in Q3 2024, up 5.6% from the same period last year. The revenue also surpassed analysts’ estimates by $115.3 million. Its operating profit was $974 million, which saw a high increase from $665 million in the prior-year period. Artisan Partners highlighted the company’s strengths in its Q3 2024 investor letter. Here is what the firm has to say:
“We made no new purchases in Q3. Instead, our purchase activity was focused on adding to a few of our existing names that remain cheap, such as Dollar General and United Parcel Service, Inc. (NYSE:UPS). When we initiated our position in UPS in late 2023, shares were under pressure due to concerns about its new labor contract diverting volumes and driving up costs, as well as the continued normalization of volumes following COVID-related gains. We welcomed the market’s short-term focus as it provided us an opportunity to purchase UPS at an undemanding valuation of less than 11X our view of normalized earnings. UPS is a good transport operation that easily earns its cost of capital, generates significant free cash, has a wide economic moat, has a strong financial profile and pays an attractive dividend—now yielding 4.8%. More recently, the stock has been weak because profits came in weaker than expected. UPS’ customers traded down to the lower yielding ground segment, which negatively impacted overall pricing and margins. These shifts are common and occur in both directions, but what is important, in our view, is the long-term trend of volume growth remains intact. Nevertheless, investors have lost patience with UPS after a string of earnings disappointments.”
United Parcel Service, Inc. (NYSE:UPS)’s cash position makes it a reliable dividend company. Its trailing twelve-month operating cash flow is $9.22 billion and its free cash flow for the period amounts to $4.1 billion. The company has been growing its dividends for the past 22 consecutive years. It currently offers a quarterly dividend of $1.63 per share and has a dividend yield of 4.87%, as of December 2.
According to Insider Monkey’s database of Q3 2024, 43 hedge funds owned stakes in United Parcel Service, Inc. (NYSE:UPS), compared with 44 in the previous quarter. These stakes have a consolidated value of over $1.6 billion. Among these hedge funds, Two Sigma Advisors was the company’s leading stakeholder in Q3.
