Yahoo Finance United Parcel Service (NYSE:UPS) Has Affirmed Its Dividend Of $1.63
The board of United Parcel Service, Inc. (NYSE:UPS) has announced that it will pay a dividend on the 5th of September, with investors receiving $1.63 per share. The dividend yield will be 5.2% based on this payment which is still above the industry average.
Check out our latest analysis for United Parcel Service
United Parcel Service's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
The next year is set to see EPS grow by 67.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
United Parcel Service Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $2.48 in 2014, and the most recent fiscal year payment was $6.52. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. So the company has struggled to grow its EPS yet it's still paying out 106% of its earnings. This gives limited room for the company to raise the dividend in the future.
United Parcel Service's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, United Parcel Service has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is United Parcel Service not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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