4. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 44
Dividend Yield as of September 16: 5.12%
United Parcel Service, Inc. (NYSE:UPS) ranks fourth on our list of the best stocks to buy for passive income. The American multinational shipping and supply chain management company offers various related services to its consumers. The company has faced challenges adapting to a changing operating environment, with reduced shipping demand and rising inflationary costs. It fell short of high-growth expectations as market observers noticed a decline in package volumes. Additionally, earnings were impacted by increased fuel and labor costs, which squeezed profit margins. In the second quarter of 2024, the company reported revenue of $21.8 billion, which showed a 1.07% drop from the same period last year. The revenue also missed analysts’ expectations by over $418 million.
Due to the company’s struggling phase, ClearBridge Investments decreased its position in United Parcel Service, Inc. (NYSE:UPS) in Q2 2024. This is what the firm said about UPS in its second-quarter investor letter:
“Our industrials holdings weighed on relative performance as we are more exposed to transports such as “less than truckload” provider XPO and parcel delivery company United Parcel Service, Inc. (NYSE:UPS), which are struggling with weak volumes during the post-COVID freight recession. With industry volumes down to pre-COVID levels and strong pricing power in the LTL space in particular, we believe that the next upcycle will prove to be very strong for earnings. As a result, we added to XPO in the quarter while reducing our position in UPS on concerns that industry capacity remains excessive. Meanwhile, we have less exposure to electrical equipment stocks, which have been rewarded by views that they will benefit from the buildout of AI data centers.”
That said, early indications of a potential turnaround in the company’s latest update provide investors with some optimism. According to United Parcel Service, Inc. (NYSE:UPS)’s earnings report, this quarter marked a key milestone, as the company achieved volume growth in the US for the first time in nine quarters. As anticipated, operating profit for the first half of 2024 declined compared to the previous year. However, the company expects to see a return to operating profit growth moving forward.
In addition to this, United Parcel Service, Inc. (NYSE:UPS) also reported a strong cash position, which is positive news for income investors. In the first six months of the year, the company generated an operating cash flow of $5.3 billion, and its free cash flow came in at over $3.3 billion. It has raised its payouts for 22 years in a row. Currently, the company offers a quarterly dividend of $1.63 per share and has a dividend yield of 5.12%, as of September 16.
According to Insider Monkey’s database of Q2 2024, 44 hedge funds owned stakes in United Parcel Service, Inc. (NYSE:UPS), up from 43 a quarter earlier. These stakes are worth over $1.3 billion in total. With over 2.5 million shares, Marshall Wace LLP was the company’s leading stakeholder in Q2.
