Core Insights - Dividends are a reliable source of income for shareholders, with healthy and growing dividend-paying stocks typically maintaining regular payouts regardless of economic conditions [1] - A decline in stock prices can lead to higher dividend yields, as the yield is calculated by dividing the total annual payout by the current share price [2] Company Summaries - **United Parcel Service (UPS)**: - The stock has decreased by approximately 33% year to date, currently yielding 7.8%, which translates to an expected annual income of about $390 for a $5,000 investment [4] - The decline is attributed to economic uncertainties, reduced online shopping, and a strategic reduction in business with Amazon [4][5] - The forward-looking price-to-earnings (P/E) ratio is 11.3, significantly below its five-year average of 15.8, indicating potential value [5] - **Target**: - Target has reported net sales of $107 billion in 2024 and operates 1,989 stores in the U.S., employing over 400,000 people [8] - The stock has fallen about 35% year to date, influenced by the abandonment of its diversity, equity, and inclusion (DEI) policy and ongoing supply chain issues [9]

Group 1: Market Overview - The stock market has performed well, with the S&P 500 rising by 14% year to date as of September 22, hitting new highs [1] - Despite the overall market performance, many high-yielding dividend stocks have struggled [1] Group 2: Investment Opportunities - Three potentially undervalued stocks for income investors are United Parcel Service (UPS), Kimberly-Clark, and Comcast, all trading near their 52-week lows and offering dividends over 4% [2][8] Group 3: United Parcel Service (UPS) - UPS offers a high dividend yield of 7.8%, significantly above the S&P 500 average of 1.2%, but its stock has declined over 30% this year due to concerns over economic conditions [4] - For the first half of the year, UPS reported revenue of $42.8 billion, a slight decrease of less than 2% from $43.5 billion in the same period last year [5] - UPS's diluted earnings per share (EPS) was $2.91, averaging $1.46 per quarter, while the quarterly dividend payout is $1.64, indicating a potential risk of dividend cuts as free cash flow of $3.5 billion is below the $5.4 billion paid in dividends [6][7] - The stock trades at a price-to-earnings (P/E) multiple of less than 13, suggesting it may be a bargain buy in the long run, but short-term challenges are anticipated [7] Group 4: Kimberly-Clark - Kimberly-Clark is recognized as a Dividend King, having raised its dividend for 53 consecutive years, with a recent increase of a little over 3%, resulting in a current yield of approximately 4.1% [8]

Group 1 - United Parcel Service, Inc. (NYSE:UPS) is considered one of the best undervalued stocks according to Reddit, but BMO Capital Markets has downgraded its rating from "Buy" to "Hold" and reduced the price target from $125 to $96, citing a lack of demand recovery in the business-to-business segment [1][2] - The company's Q2 2025 results highlight the complexity of the market landscape and the strength of its execution, with expected capital expenditures of approximately $3.5 billion and anticipated expense reductions of $3.5 billion due to network reconfiguration and Efficiency Reimagined initiatives [2] - United Parcel Service, Inc. continues to make progress on its strategic initiatives, positioning itself for stronger long-term financial performance and enhanced competitive advantage [2] Group 2 - River Road Asset Management's Q4 2024 investor letter indicates that the portfolio held 29 positions, with a notable increase in the industrials sector by 736 basis points and a decrease in consumer discretionary by -276 basis points [3] - While acknowledging UPS's potential as an investment, River Road Asset Management believes that certain AI stocks present greater upside potential and carry less downside risk [3]

Core Viewpoint - United Parcel Service (UPS) stock presents an intriguing investment opportunity with a low valuation of less than 13 times the Wall Street analyst consensus earnings estimate for 2025 and a high dividend yield of 7.7% [1] Group 1: Capital Allocation Strategy - UPS management plans to allocate $5.7 billion in free cash flow (FCF), with $5.5 billion designated for dividend payments and $1 billion for share buybacks [3] - CEO Carol Tomé reassured investors about the company's liquidity to pay dividends and mentioned potential debt financing for share buybacks, as the cost of debt was lower than the dividend yield at that time [4] - Management executed $1 billion in share buybacks in the first half of the year, despite the stock trading at significantly lower prices now [5] Group 2: Market Conditions and Operational Adjustments - The current trading environment is challenging, with deteriorating end markets and operational adjustments being made [6] - UPS is scaling back Amazon delivery volumes and transitioning final-mile delivery from USPS for SurePost packages in 2025, indicating a noisy operational year [7] - FCF in the first half of the year was only $742 million, a significant drop from $3.4 billion in the same period of 2024, raising concerns about meeting the full-year target of $5.7 billion [8]

This story was originally published on Supply Chain Dive. To receive daily news and insights, subscribe to our free daily Supply Chain Dive newsletter. UPS is seeking to improve its bottom line through employee buyouts, but the move could introduce service risks and strife with the International Brotherhood of Teamsters union, industry observers say. The delivery giant is in the midst of voluntary buyout programs for full-time drivers, who are represented by the Teamsters, and select operations managers ...

Group 1 - The core narrative surrounding United Parcel Service (UPS) is its status as a low-risk turnaround stock, with a current dividend yield of 7.7% but a trailing 12-month dividend payout ratio exceeding 95%, raising concerns about a potential dividend cut [3][7] - The COVID-19 pandemic led to a surge in demand for UPS's shipping services as consumers shifted to online shopping, which initially boosted the stock price, but the subsequent normalization of consumer behavior caused a decline in shares [4][5] - UPS management is undertaking a significant business overhaul aimed at improving efficiency and focusing on the most profitable segments, which includes costly agreements with unions, asset sales, technology upgrades, and location closures [5][6] Group 2 - The current financial results of UPS are under pressure due to the costs associated with the ongoing business transformation, which has contributed to the high dividend payout ratio [7] - Wall Street's short-term focus contrasts with UPS's long-term strategy, indicating that the company is resetting its business model, which may lead to a reduction in the dividend [7][8] - The decision to reduce its relationship with Amazon by 50% reflects UPS's strategy to prioritize higher-margin business over low-margin contracts [6]

Core Insights - United Parcel Service (UPS) is experiencing revenue weakness primarily due to weak demand driven by tariff-related uncertainties, high inflation, and geopolitical issues, with a 2.7% year-over-year revenue decline in the June quarter [1][9] Revenue and Operating Performance - In Q2 2025, UPS reported a consolidated operating margin of 8.8%, down from 9.5% a year ago, with average daily volume declining by 7.3% year over year [2][9] - UPS has not provided revenue or operating profit guidance for 2025 due to ongoing uncertainties [2] - Adjusted operating expenses are expected to decline by 2.7% year over year in 2025, while revenues are projected to decrease by 4.7% [4] Customer Relationship Impact - UPS has decided to reduce its business with Amazon by over 50% by June 2026, as Amazon was not considered a profitable customer [3][9] Competitive Landscape - FedEx, a competitor of UPS, is also facing weak demand and is implementing cost-cutting measures, anticipating $1 billion in permanent cost reductions for fiscal 2026 [5] Stock Performance and Valuation - UPS shares have declined over 30% this year, underperforming its industry [6] - The company trades at a 12-month forward price-to-earnings ratio of 11.81X, slightly below industrial averages [7] Earnings Estimates - The Zacks Consensus Estimate for UPS' earnings for Q3, Q4, full-year 2025, and full-year 2026 has been revised downward over the past 60 days [11]

Group 1 - Jim Cramer discussed United Parcel Service, Inc. (NYSE:UPS) in relation to FedEx, highlighting that the market often conflates the two companies despite their differences [2][3] - UPS currently pays a quarterly dividend of $1.64, resulting in an annual dividend yield of 7.78%, but there are concerns regarding the sustainability of this dividend due to free cash flow issues [2][3] - The free cash flow for UPS is reported at $5.27, which does not adequately cover the dividend payment of $6.56, raising questions about the company's financial health [3] Group 2 - There is a belief that while UPS has potential as an investment, certain AI stocks may offer higher returns with lower risk, suggesting a shift in focus for investors [4]

Core Viewpoint - High dividend stocks can enhance portfolio returns, but some may represent yield traps due to significant share price declines, increasing the risk of dividend cuts [1][2] At-Risk Dividend Companies LyondellBasell - Current yield is 10.4% but has faced a 96.7% drop in trailing 12-month net income over the past three years and a 91.6% decline in free cash flow to $453 million [4][6] - The company’s annual dividend payouts total $1.72 billion, raising concerns about sustainability given its cash reserves of $1.7 billion [6][7] - A "Cash Improvement Plan" has been initiated, but reliance on borrowing to maintain dividends is not sustainable [7][8] Dow - Current yield is 5.8%, with earnings and free cash flow turning negative in the most recent quarter [9] - The dividend yield exceeded 10% as share prices fell over 60%, leading to a cut in quarterly dividends from $0.70 to $0.35 per share [10] - Further cuts may be necessary if the industry slump continues [10] UPS - Current yield is 7.8%, with net income down 50% and free cash flow down 65% over the last three years [11] - Dividend payouts of $5.4 billion exceed trailing cash flow of $3.5 billion, raising concerns about the sustainability of dividends [12] - The company has a cash reserve of $6.3 billion, but this may not be sufficient to avoid a dividend cut [12] Safe Dividend Company MPLX - Current yield is 7.6%, with net income and free cash flow growing over the past three years [13][15] - The company has a distributable cash flow that is 1.5 times higher than its dividend payouts, providing ample coverage for potential business downturns [15] - MPLX offers a more secure dividend option compared to LyondellBasell, Dow, or UPS [16]

Core Viewpoint - The article highlights the attractiveness of high-yield dividend stocks, particularly during market downturns, as they provide income and potential for share-price appreciation [1][2]. Group 1: United Parcel Service (UPS) - United Parcel Service (UPS) currently offers a dividend yield of 7.8%, with shares down approximately 33% year-to-date as of September 22 [4]. - The company has faced challenges post-COVID-19, including a decline in business and reduced contracts with Amazon [5]. - There are indications of a turnaround, with CEO Carol Tomé expressing confidence in strategic initiatives aimed at improving long-term financial performance [6]. Group 2: Pfizer - Pfizer has a dividend yield of 7.2% and has experienced an 8% decline in share price over the past year [7]. - The company is navigating a post-pandemic landscape with ongoing sales of its COVID-19 vaccine and treatments, while also focusing on a robust pipeline of over 50 drug programs [8]. - Despite potential risks in the U.S. healthcare environment, Pfizer's shares appear undervalued with a forward P/E ratio of 7.7, below its five-year average [8]. Group 3: Altria Group - Altria Group offers a dividend yield of 6.5%, with a total annual payout recently at $4.12 per share, up from $3 in 2018 [9]. - The company faces challenges from declining smoking rates in the U.S. but is investing in smokeless products to offset cigarette losses [9]. - Altria's shares are considered fairly valued to somewhat overvalued, with a forward P/E ratio of 11.6, slightly above its five-year average [9].