Hello and welcome to Yahoo Finance's special breaking news coverage of the October Fed decision. I'm Josh Lipton here with my colleague Julie Hyman and we're just moments away now from the Fed decision and markets. You can see we are higher.Just a quick check of the popular averages here. You have the Dow up 120 points. The S&P 500, your broad gauge is about 2/10 of a percent. Your tech heavy NASDAQ it's up about 6/10 of a percent.So Julie, the big day is here. You've marked your calendar. What do we expect ...

Core Viewpoint - UPS' stock has experienced a significant decline of 60% from its 2022 highs, now trading below pre-pandemic levels, which is crucial for potential investors to consider [1][6]. Business Overview - UPS operates a complex logistics network that is difficult to replicate, evidenced by its continued partnership with Amazon despite Amazon's own delivery service investments [2][4]. - The core business of UPS revolves around package delivery, which encompasses pickup, routing, and delivery, each requiring substantial operational effort [3][4]. Market Dynamics - The demand for package delivery is expected to persist as long as people reside in different locations, indicating a stable long-term business model [2][6]. - The stock price decline is attributed to a post-pandemic adjustment after an initial surge in demand, which was overestimated by Wall Street [6][8]. Strategic Initiatives - UPS is actively modernizing its operations by investing in technology, closing older distribution centers, and refocusing on more profitable segments, including reducing its relationship with Amazon due to low-margin deliveries [7][8]. - These strategic changes have led to lower revenue and increased costs, raising concerns among investors despite the long-term benefits of modernization [8][9]. Dividend Considerations - The current dividend yield stands at 7.7%, which raises concerns about a potential dividend cut, especially as the payout ratio approaches 100% [9][10]. - Historically, the payout ratio has been in the 70% to 80% range, but the ongoing business overhaul may necessitate a reset of the dividend [10][12]. Long-term Investment Potential - UPS is viewed as a reliable long-term investment option, with the potential for increased profitability post-modernization, although caution is advised for those seeking stable dividends [11][12].

Core Insights - The article emphasizes the importance of dividends in investment strategies, highlighting that even renowned investors like Warren Buffett recognize their value, despite Berkshire Hathaway not paying dividends [1] Company Summaries - **Pfizer**: Pfizer has a recent dividend yield of 7.1%, with total annual dividends increasing from $1.20 in 2016 to $1.70 recently. Despite poor stock performance averaging annual gains of 1.84% over the past decade, the company has a promising drug pipeline and a low forward P/E ratio of 8.3 compared to its five-year average of 10.2 [4] - **Caterpillar**: Caterpillar offers a dividend yield of 1.56%, above the S&P 500's yield of approximately 1.25%. The company has shown solid long-term performance with average annual gains of 17.6% over the past decade, and its total annual dividend has grown from $3.28 in 2018 to $5.64 recently [5] - **United Parcel Service (UPS)**: UPS has a dividend yield of 6.5%, with total payouts increasing from $3.64 in 2018 to $6.54 recently. The stock has had an average annual gain of 4.24% over the past decade, although growth has slowed recently due to economic uncertainties and competition from Amazon [6][7] - **Chevron**: Chevron's recent dividend yield stands at 4.78%, with total annual payouts rising from $4.76 in 2019 to $6.68 recently. The stock has averaged 14.2% annual growth over the past five years, supported by significant share buybacks and diversification in energy production and refining [8] ETF Considerations - The article suggests considering dividend-focused ETFs for investment, listing several options with their recent yields and average annual returns: - iShares Preferred & Income Securities ETF (PFF): 6.68% yield, 5-year average return of 3.22% - Schwab U.S. Dividend Equity ETF (SCHD): 3.97% yield, 5-year average return of 13.34% - Fidelity High Dividend ETF (FDVV): 3.02% yield, 5-year average return of 17.91% - Vanguard High Dividend Yield ETF (VYM): 2.86% yield, 5-year average return of 14.60% [9]

Dividend Stocks Overview - Dividend yield is a key metric for investors, indicating how much a company pays in annual dividends relative to its stock price [1] - The sustainability of a company's dividend yield is often assessed through its dividend payout ratio, which shows the percentage of net income distributed as dividends [1][3] - A high dividend yield may result from a declining stock price, which could indicate underlying issues [2] Altria Group (MO) - Altria Group has a dividend yield of 6.83% and an annual dividend of $4.08, with a payout ratio of 68.34% [5][6] - The company has a strong track record of 56 consecutive years of dividend increases and an annualized 3-year dividend growth of 4.35% [5][8] - Despite the decline in traditional tobacco smoking, Altria is pivoting towards alternative nicotine products, which may support future revenue and earnings growth [7] - The stock has delivered a total return of over 609% in the last 15 years, and its current P/E ratio of 9x indicates it is undervalued compared to its historical performance [6][7] United Parcel Service (UPS) - UPS has a dividend yield of 6.88% and an annual dividend of $6.56, with a high payout ratio of 95.63% [9][10] - The company has a history of maintaining dividends even during economic downturns, with a cash flow payout ratio of 66% [10] - UPS is undergoing a turnaround plan that is expected to improve margins, and its P/E ratio is around 14x, which is a discount to historical averages [11] Verizon Communications (VZ) - Verizon has a dividend yield of 6.25% and an annual dividend of $2.71, with a payout ratio of 64.52% [12][14] - The company has a 20-year track record of dividend increases, but its recent total return over 10 years is only 45.22% [13][14] - Verizon is facing challenges with subscriber losses but has received FCC approval for a deal to acquire Frontier, which may enhance its competitive position [13][14]

Core Viewpoint - UPS shares have dropped over 50% from their 2022 high, but the stock is viewed as a strong long-term investment opportunity due to its high dividend yield and potential for recovery [1]. Group 1: Reasons for Stock Decline - UPS stock experienced significant growth of nearly 150% from March 2020 to January 2022 due to increased package delivery volumes during the COVID-19 pandemic [4]. - The post-pandemic period saw a slowdown in UPS' business, compounded by challenging negotiations with the Teamsters Union, which affected profits despite avoiding a strike [5]. - UPS announced plans to cut its Amazon shipment volume by over 50% by 2026, leading to further declines in stock price, as Amazon accounted for 11.8% of UPS' total revenue in 2024 [6]. Group 2: Recovery and Growth Potential - UPS reported a 4.2% year-over-year increase in earnings for Q1 2025, indicating recovery as the higher costs from the Teamsters Union contract were front-loaded [8]. - The company is restructuring its network to cut approximately $3.5 billion in costs this year while focusing on more profitable shipment areas such as healthcare, international, B2B, and SMB markets [9][10]. - Despite uncertainties from tariffs affecting shipment volumes from China, UPS anticipates that these will be offset by increased shipments from China to non-U.S. destinations and other international routes [11]. Group 3: Investment Rationale - The demand for package deliveries is expected to grow over the next decade, supported by UPS' extensive delivery network, which provides a competitive advantage [12]. - UPS offers a forward dividend yield of 6.58%, which is attractive for generating total returns, although there is a possibility of a dividend cut [13]. - The stock is currently trading at 14.6 times forward earnings, a historically low valuation for the company, making it an appealing investment opportunity [13].