3. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 43
Dividend Yield as of February 5: 5.83%
United Parcel Service, Inc. (NYSE:UPS) is a Georgia-based shipping and supply chain management company offering its consumers various related services. In the fourth quarter of 2024, the company posted revenue of $25.3 billion, which showed a 1.54% growth from the same period last year. The company has reached a preliminary agreement with its largest customer to reduce its volume by over 50% by the second half of 2026. In addition, starting January 1, 2025, it will handle 100% of its UPS SurePost product in-house. As part of these changes, the company is reorganizing its US network and launching multi-year “efficiency reimagined” initiatives, aiming to achieve about $1.0 billion in savings through a comprehensive process redesign.
In addition to delivering strong earnings, United Parcel Service, Inc. (NYSE:UPS) is focusing on growing its healthcare logistics services with the goal of becoming a global leader in this area. In January 2025, it successfully acquired Frigo-Trans and its subsidiary BPL, enhancing UPS’s capacity to provide complete temperature-controlled logistics solutions, particularly in Europe.
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) is popular among income investors because of its strong dividend history and stable balance sheet. In FY24, the company generated $10.1 billion in operating cash flow and its free cash flow amounted to $6.3 billion. Moreover, the company returned $5.9 billion to shareholders through dividends and share repurchases. This cash position enabled it to raise its payouts for 22 consecutive years, which makes UPS one of the best dividend stocks on our list. The company pays a quarterly dividend of $1.63 per share and has a dividend yield of 5.83%, as of February 5.
Insider Monkey’s database of Q3 2024 indicated that 43 hedge funds owned stakes in United Parcel Service, Inc. (NYSE:UPS), compared with 44 in the previous quarter. These stakes have a total value of over $1.66 billion.
