The company's yield is much higher than its long-term average. With no dividend cut likely, this could mean the stock offers an opportunity for a strong return
Aside from reviewing a company’s most recent earnings
report, one item I like to consider before making an investment is how the
current dividend yield compares to the long-term historical average. I often
use both the five and 10-year averages to see if shares are over- or
undervalued based on the yield. If the company can’t provide earnings per share
guidance, then using the dividend yield can be another way to value a stock.
One company that is trading with a dividend yield above both
its five and 10-year averages is United Parcel Services Inc. (NYSE:UPS).
On April 28, UPS, which is the largest integrated air and
ground package delivery carrier in the world and trades with a market
capitalization of nearly $93 billion, reported mixed first-quarter earnings
results. Revenue grew 5.1% to $18 billion, beating estimates by $865 million.
Earnings per share, however, declined 17% to $1.15, 8 cents below what analysts
were looking for.
Adjusted net income declined by $200 million, with $140
million of this related to the disruption to customers related to the Covid-19
pandemic. Casualty self-insurance accruals were a $110 million drag on results.
These were partially offset by an additional operating day, which added $50
million to net income totals.
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