1 Magnificent High-Yield Stock Down 60% to Buy and Hold Forever

Core Viewpoint - United Parcel Service (UPS) is undergoing a significant turnaround as it faces challenges in the post-pandemic environment, with Wall Street remaining skeptical about its stock performance despite early signs of improvement [2][4][6]. Dividend Analysis - UPS has increased its dividend annually for 16 years, with the most recent increase being a token penny per share per quarter, indicating a desire to maintain its dividend streak despite business pressures [3][4]. - The dividend payout ratio is around 100%, and the cash dividend payout ratio is approximately 120%, raising concerns about the sustainability of the dividend if financial results do not improve [5][6]. - A reset of the dividend is more likely than elimination, as the company is in the midst of a business reset to enhance financial performance [6]. Business Strategy - UPS is focused on slimming down operations and improving profitability, which is challenging given the capital-intensive nature of package delivery [7][8]. - The turnaround strategy includes selling business lines, closing facilities, selling assets, investing in technology, and shifting focus to more profitable customers [9]. - Despite a decline in revenue, profitability has improved, with adjusted operating margin rising from 8.9% in Q3 2024 to 10% in Q3 2025, indicating progress in the turnaround efforts [10][11]. Financial Performance - Revenue fell by 3.7% year over year in Q3 2025, while adjusted earnings declined by 1.1%, suggesting that profitability is improving as revenue declines at a slower rate [10][11]. - The U.S. division saw a 9.8% improvement in revenue per piece, driven by customer and product mix changes, indicating positive developments in the core business segment [12]. Long-term Outlook - UPS's high dividend yield may signal value, suggesting that Wall Street's outlook is overly pessimistic, and long-term investors may find opportunities as early signs of improvement emerge [13]. - Even if the dividend is cut, it is expected to remain attractive relative to the market, emphasizing the importance of understanding UPS's long-term goals [14].