Core Insights - UPS shares have declined significantly, losing nearly 33% in the past year and over 60% since early 2022, resulting in a dividend yield of 7.5%, which is substantially higher than the S&P 500's 1.2% and FedEx's 2.4% [1][3] Financial Performance - UPS's second-quarter revenue decreased by nearly 3% to $21.2 billion, with adjusted earnings dropping 13% to $1.55 per share, impacting cash flow [4] - Cash flow from operations was $2.7 billion and free cash flow was $742 million in the first half of the year, both significantly lower than last year's figures of $5.3 billion and nearly $3.4 billion respectively [4] Dividend Sustainability - The company paid $2.7 billion in dividends in the first half of the year, which was $2 billion more than its free cash flow during the same period, leading to increased debt [5] - Long-term debt rose from $19.5 billion to $23.8 billion, indicating reliance on debt to fund dividends, which is not sustainable long-term [5] Strategic Initiatives - UPS has initiated a two-pronged strategy to realign its business, focusing on reducing reliance on Amazon and enhancing higher-margin operations like healthcare logistics [6] - The company aims to achieve $3.5 billion in annual cost savings by the end of the year through various measures, including closing buildings and reducing headcount [6][7]

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]