Should You Buy UPS Stock While It's Below $90?

Core Viewpoint - United Parcel Service (UPS) presents a compelling opportunity for income investors despite its stock price decline of over 30% year-to-date, particularly due to its strong dividend yield and long-term growth prospects. Group 1: Dividend Sustainability - UPS maintains a forward dividend yield of 7.38%, which is considered "rock solid" by management, supported by solid free cash flow and a strong investment-grade balance sheet [2][3] - The company has sufficient financial flexibility to fund its dividend, and management is committed to maintaining a stable and growing dividend [3] Group 2: Temporary Headwinds - Current challenges facing UPS, such as low U.S. consumer sentiment, are expected to be temporary, as consumer sentiment does not remain low indefinitely [4] - The decline in consumer sentiment is attributed to uncertainties surrounding tariffs from the Trump administration, which led to a 34.8% drop in average daily volume from China to the U.S. in May and June [5] - Despite the challenges, UPS reported a 22.4% increase in volume between China and the rest of the world in Q2 [5] Group 3: Profitability Boost from Amazon Strategy - UPS' decision to reduce its shipment volume for Amazon by 50% is anticipated to enhance profitability in the long run [6] - The company is implementing a voluntary separation program for full-time U.S. drivers to address staffing attrition, which is expected to reduce costs significantly as longtime drivers retire [7] Group 4: Long-term Growth Prospects - UPS has strong long-term growth prospects, particularly in complex healthcare logistics, which represents an $82 billion addressable market [9] - The company aims to become the world's leading provider in complex healthcare logistics and is set to close a $1.6 billion acquisition of Andlauer Healthcare Group, enhancing its capabilities in the healthcare sector [10] - Small-to-medium-sized businesses (SMBs) are also a growth driver, contributing 32% of total U.S. volume in Q2, with SMB penetration increasing by 230 basis points [11]