We recently published a list of Dividend Contenders List: Top 15. In this article, we are going to take a look at where United Parcel Service, Inc. (NYSE:UPS) stands against other top dividend contenders.
Dividend stocks have remained a popular choice among investors due to the steady income they provide, becoming even more attractive when payouts grow over time. Many investors look for companies with a track record of consistently increasing dividends, as this ensures rising income in the long run. However, maintaining steady dividend growth is no easy feat. For example, “dividend aristocrats” are companies that have raised their dividends for at least 25 consecutive years, a distinction achieved by only about 68 US companies. This highlights the difficulty of sustaining such a standard. Nonetheless, numerous companies continue to build strong, albeit shorter, histories of dividend growth, demonstrating resilience and the potential to reach new milestones. “Dividend contenders” are those that have consistently increased their dividends for at least 10 years, though they have yet to attain the 25-year benchmark required to be classified as long-term dividend growers.
Dividend stocks appeal to investors because they help cushion portfolios against market downturns while still offering growth opportunities. Historically, investment strategies centered around dividends have demonstrated stability across various regions and market cycles. A report by Franklin Templeton noted that over the three years leading up to December 31, 2024, companies that pay dividends experienced lower volatility and smaller declines compared to the broader market in global, US, and European markets. When inflation and interest rate concerns reemerged in August 2024, dividend stocks remained relatively steady.
Companies that pay regular dividends often belong to non-cyclical industries such as consumer staples, utilities, and healthcare, which tend to be more resilient during economic downturns. As 2025 began, growing concerns over rising inflation and slowing economic growth led investors to increase their exposure to defensive stocks, aiming to protect their portfolios from potential market volatility.
Ned Davis’s Clissold and his team made the following comment on the situation:
“One would expect that companies that pay dividends are more stable and have lower growth rates. As a result, they should rally less in up markets and decline less in down markets. In other words, they have lower betas than non-dividend-payers. … As a group, dividend-payers have a beta of 0.99 versus 1.11 for nonpayers.”
Investors tend to favor companies with a track record of consistently increasing their dividend payouts. A study by Nuveen found that firms initiating or raising dividends have historically outperformed in the three years following a Federal Reserve interest rate hike. Dividend growth is often linked to solid corporate earnings. In February, the overall market faced challenges, slipping more than 2% as investors reacted to inflation worries, potential tariffs linked to former President Donald Trump, and rising geopolitical tensions. On February 28, the major index briefly turned negative for the year. However, fourth-quarter earnings reports have emerged as a new driving force, helping to support market sentiment.
Companies continued to boost their dividend payouts in the fourth quarter of 2024. According to a report from S&P Dow Jones Indices, a total of 635 companies raised their dividends during the quarter, amounting to $14.2 billion. Over the full year, total dividend increases climbed to $71.4 billion, up from $65.1 billion the year before. Given this, we will take a look at some of the best stocks in our dividend contenders list.
Our Methodology
This list focuses on dividend contenders—companies known for raising their dividends consistently for 10 years but less than 25. From this group, we selected prominent companies with the highest dividend yields as of March 12 and ranked from lowest to highest yield.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A warehouse filled with boxes of parcels, symbolizing the companies reliable logistics services.
United Parcel Service, Inc. (NYSE:UPS)
Dividend Yield as of March 12: 5.69%
United Parcel Service, Inc. (NYSE:UPS) ranks sixth on our dividend contenders list. The American shipping and supply chain management company is expanding its healthcare logistics services as part of its long-term strategy to establish itself as a global leader in the industry. In January 2025, it strengthened its position by acquiring Frigo-Trans and its subsidiary BPL, enhancing its ability to offer advanced temperature-controlled logistics solutions, particularly across Europe.
In the fourth quarter of 2024, United Parcel Service, Inc. (NYSE:UPS) reported revenue of $25.3 billion, reflecting a 1.54% increase from the previous year. The company also reached a preliminary agreement with its largest customer to reduce volume by more than 50% by the second half of 2026. Additionally, as of January 1, 2025, UPS will assume full control of its SurePost product. In response to these changes, it is restructuring its U.S. network and rolling out a multi-year efficiency initiative aimed at streamlining operations, with the goal of achieving approximately $1 billion in cost savings through a comprehensive process overhaul.
United Parcel Service, Inc. (NYSE:UPS) raised its quarterly dividend by 0.6% in February to $1.64 per share, which marked its 23rd consecutive year of dividend increases. The stock supports a dividend yield of 5.69%, as of March 12. The company remains appealing to income investors, backed by strong cash flow. In fiscal 2024, UPS generated $10.1 billion in operating cash flow and $6.3 billion in free cash flow. It also returned $5.9 billion to shareholders through dividends and share repurchases.
Overall, UPS ranks 6th on our list of top dividend contenders. While we acknowledge the potential for UPS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UPS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.