Core Viewpoint - United Parcel Service (UPS) is currently undervalued but is positioned for a potential turnaround, making it an attractive investment opportunity for those looking beyond its high dividend yield of 7.9% [1]. Group 1: Business Operations - UPS provides essential package delivery services that are complex and challenging to execute efficiently, as evidenced by Amazon's continued reliance on UPS despite its own delivery investments [2]. - The pandemic led to a surge in package demand, which inflated UPS's stock price. As demand normalized post-pandemic, the stock price fell, prompting UPS to initiate a significant business overhaul to enhance profitability through technology and focus on high-margin services [4]. Group 2: Financial Performance - UPS is undergoing a multi-year restructuring that involves substantial upfront costs and a strategic exit from low-margin businesses, which may initially reduce sales but is expected to improve profitability in the long run. This includes a deliberate reduction in business with Amazon [5]. - Recent financial results have been disappointing, with a dividend payout ratio exceeding 97%, indicating caution for income-focused investors [5]. - Positive signs are emerging, such as a 5.5% increase in revenue per piece in the U.S. business during Q2 2025, suggesting that UPS may be on the verge of a recovery as confidence in its business transformation grows [6].

Core Viewpoint - Target's stock has experienced significant volatility, currently trading around $95 per share, which is near the low end of its 52-week range, leading to a dividend yield of 4.7% [1][11] Financial Performance - Target's first-quarter net sales decreased by 2.8% due to lower traffic, with the company holding or gaining market share in 15 out of 35 merchandising divisions [3] - The company has revised its fiscal 2025 adjusted earnings per share (EPS) guidance down to $7 to $9, compared to a previous forecast of $8.80 to $9.80, alongside a low single-digit decline in sales [5] - In fiscal 2024, Target's comparable sales grew by just 0.1%, with traffic increasing by 1.4%, and adjusted EPS of $8.86, slightly down from $8.94 in fiscal 2023 [6] Dividend Sustainability - Despite weak results, Target remains profitable enough to support its growing dividend, which has been paid and raised for 53 consecutive years, classifying it as a Dividend King [9][10] - The midpoint of Target's adjusted EPS guidance of $8 per share is significantly higher than its $4.48 per share dividend payment, indicating that the dividend is affordable [10] Valuation Insights - Target's current price-to-earnings (P/E) ratio is 11.9 based on the midpoint of its fiscal 2025 earnings forecast, which is below its 10-year median P/E of 15.6, suggesting it is undervalued [12] Strategic Considerations - Target needs to focus on enhancing its in-store experience rather than competing directly with Walmart and Amazon on price, leveraging successful partnerships like the recent collaboration with Kate Spade [14] - The company has a clear path to regain its competitive edge, making it a potential turnaround stock for investors seeking passive income [15]