April 10, 2017

UPS Purchased To Meet These Specific Objectives



United Parcel Service Inc. (UPS) currently offers a dividend yield in excess of 3%. Moreover, it is also available at a valuation that is slightly below historical norms. The company has provided a stable and growing dividend since it went public in 1999. However, the company did keep their dividend the same for fiscal years 2001 and 2002, but they did not cut it. Additionally, 2008 included five dividend payments due to a change in their dividend payment schedule. Nevertheless, their dividend growth rate since 1999 has averaged 13% per annum, but the dividend growth rate has slowed somewhat to 8.2% per annum since 2013.

United Parcel Service Inc. carries an A+ credit rating from S&P but does have a debt to capital ratio of 75% – which I consider a concern. However, the company generates significant revenues and produces ample cash flows to service and eventually retire its debt. Moreover, a significant portion of their debt is long-term, which does moderately alleviate my concerns. But more importantly, the debt they have recently taken on was used to fund numerous acquisitions since 2014 and to expand international services significantly. I see the latter as a huge opportunity that should bear fruit over the longer run.




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