UPS current yield is currently at 4.03%, bringing it into my crosshairs as a potential income stock.
UPS has had improving revenues for the period 1Q13 to 1Q19, the period I've tracked it. But its CFFO has been schizophrenic over this period, showing wide fluctuations even when I use a rolling 4Q period to track trending. The trend line is indeed positive, but the measure of variance around it is wide. At around $95, its near its 3 year low, with a price history that looks as saw-toothed as its operational CF history.
This shows the wide fluctuations in operational cash, even when smoothed over rolling 4Q periods. Eye-balling the Statement of Cash Flows suggests most of this variance is due to changes in working capital accounts, with occasional high expenses for such things as pension fund contributions. In contrast, Revenue per share has been very stable over time
However, it barely nudged over the past 12 months, which may be the market's concern.
Interest expense as a % of CFFO + Interest is in the 5% - 9% range which is good for UPS. This has enabled UPS to pay for all CFFI with operational cash after the dividend in 13 of the past 23 4Q periods. Dividend to net CFFO payout ratio, again using R4Q, even with the wide swings in CFFO, has only been greater than 50% in two 4Q periods since 1Q13. Over the past 2 4Q periods, it has been 24% and 28%, respectively.
Dividend growth has also been up and down over past 10 years...
...although dividend growth has been consistent....almost automatic and perfunctory rather than a reflection of the company's ability to pay it.
Unless there is some huge risk ahead for UPS, such as Amazon deciding they can gradually deliver all of their own packages...something that wouldn't surprise me.....UPS seems like a pretty safe 4% yield.
Thanks a lot for the detailed analysis. Quick question, your graphs show a lot of information. Can you pelase let me know where you are generating these graphs from ?
Teamsters, closings, layoffs, trade wars, AMZN one day delivery, flat earnings, some joker running for president trying to boost the USPS. It’s adrift so the price could go anywhere. Price is following earnings which are directionless, unpredictable or drifting down. If you have patience maybe Trump is dumped next year you may have more uncertainly and the price may drift lower. The casino is always open, place your bets. Despite all the academic papers and warnings market timing lives.
The graphs I create out of the raw data I copy/paste in mostly from Morningstar 10 year/quarter data tables I access through our local library or you can get from Morningstar if you subscribe to their Premium service. But I wanted to go back and include all of 2013 through 1Q19 (25Q) so I accessed the historic data from Mergent On-line, also from our county library. Here is an example of the data once I've copy/pasted it into the Excel SS:
Once the data is in the Excel SS, the formula columns automatically do their calculations, which you can see as the shaded cells. So below are the columns of auto calculations that are to the right of the right-hand column above (it all wouldn't fit in one uploaded JPG file....
Now its just a case of using the 'Insert' and then 'Column' or 'Line' to insert the kind of graph you wish so you can see the trending. (note: I'm using Excel 2007 so this could be slightly different on a different year of Excel you may be using).
If you are interested in building your own charts/graphs on dividend payers you may be interested in, if you send me your e-mail address I'll reply with this sheet attached. Incomeonly at comcast dot net
We hold a position in UPS, and first bought it years ago (2006). I have periodically added whenever it’s “fallen out of bed”, and I like it as a dividend growth stock. I have another limit order in for 200 shares at $93/ share. Currently we hold 700 shares, but looking to add to it. I see online E-commerce as a long term growth area, and the “delivery” of those products is an area that will continue to grow.
I seriously doubt Amazon will be able to “replicate” the huge infrastructure and logistics systems that UPS has. Yes, AMZN is trying to develop their own “distribution” model, and cut out UPS, Fed Ex, and other delivery platforms. BUT, that’s not going to be an easy process, and I suspect it would take at least 20-30 years (minimum) to replace the full delivery spectrum. Don’t think that will happen, at least in the near future.
With the growth of “e- commerce”, UPS is positioned in “the sweet spot”. Everyone talks about AMZN, but WMT, E-Bay, JD.com, BABA, Shopify, Jingdong (Chinese company), Rakuten (Japanese company), etc., ALL sell massive amounts of product online, and all require “delivery”- via UPS, Fed Ex, or the USPS. So even if AMZN could completely “replace” delivery using UPS, that’s only a portion (35-40%) of the total shipping through UPS. And that’s JUST in the US, AMZN is much smaller worldwide. So I think this “threat” is not nearly as bad as some fear.
I do not view KHC as a buy. They have accounting issues and are not executing operationally. In addition, 3G Capital runs the show, which is a negative in my mind.
Thanks for that link. I agree with his points.
I did not buy it for the dividend. I think I can get some cgs from it at this price. It is not meant to be a long term hold. I want to see if this works out. It doesn't have to rebound much for a 20% cgs.
I want to see if this actually happens. But that article makes sense.