This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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United Parcel Service, Inc. is a company sporting a good dividend yield and one that has seen strong dividend growth in the past few years. I have also been a recent customer of theirs a number of time and have been impressed with their service and delivery. As a result, I thought I might have a look at their stock to see if it is worth adding to my Watch List.
As I did on my last dividend stock analysis, I have further updated my stock selection methodology to incorporate another important element in my stock selection criteria. I have now included a dividend growth rate component. To get the point here, a company must have a dividend growth rate what is higher in the current year than it was the year before. This will be a tough metric to pass for many companies, however if they do the rewards to us dividend investors will be great.
The Company: United Parcel Service, Inc (UPS-N)
United Parcel Service, Inc. is the world’s largest express carrier, the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services. Their primary business is the time-definite delivery of packages and documents throughout the United States and in over 200 other countries and territories. They have established a vast and reliable global transportation infrastructure, developed a comprehensive, competitive and guaranteed portfolio of services and consistently supported these services with advanced technology.
| No | |
| No |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 1.0 out of 1.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 0.5 out of 1.0 |
TOTAL FUNDAMENTALS SCORE: 1.5 out of 2.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 1.0 out of 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 0.85 | 0.0 |
| Payout Ratio | Less Than 60% | 308% | 0.0 |
| Credit Rating | BBB+ | AA- | 1.0 |
| Total Ratio Score | 1.0 out of 3.0 |
TOTAL RATIOS SCORE: 2.0 out of 4.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Growth Years
| Criteria | Scoring |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Years Score | 0.0 out of 1.0 |
Click to EnlargeDividend Growth Rate
| Criteria | Scoring |
| Current Year Div Growth Greater Than or Equal to Previous Year | 1.0 |
| Current Year Div Growth Less Than Previous Year | 0.0 |
| My Dividend Growth Rate Score | 1.0 out of 1.0 |
TOTAL DIVIDEND GROWTH SCORE: 1.0 out of 2.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 1.5% | 1.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 1.8% | 1.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 25.0 | 1.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 0.54 | 1.0 |
| Price to Sales | Less Than 1.5 | 1.22 | 1.0 |
| Total Ratio Valuation Score | 5.0 out of 5.0 |
Expected Return
| Criteria | Scoring |
| Expected Return Score Greater Than 10% | 10.7% |
| Expected Return Score Less Than 10% | 0.0 |
| My Expected Return Score | 1.0 out of 1.0 |
TOTAL STOCK VALUATION SCORE: 6.0 out of 6.0
TARGET PRICE
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 2.0 |
TOTAL TARGET PRICE SCORE: 2.0 out of 2.0
SUMMARY
Points Earned:
12 out of 16 – half points are rounded down to be conservative
The stock is rated Medium with 12.5 points earned through my analysis of the stock. This is a case where the valuation of the company is strong but the history of company performance is just not adding up yet. If the most recent history of the stock is any guide for the future then there should be good things to come for this stock. However, being the patient investor that I am I am going to wait to see one more year of dividend growth and a payout ratio that is better in line with where it should be. I am not going to add it to my watch list yet, but might in 2009.
| Rating | Points Required |
| High | 14+ points |
| Medium | 10-13 points |
| Low | Less Than 10 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in UPS
I really like UPS long term and at these levels I am interested.
Thanks for the detail, as always!
I have owned UPS Stock for 30+ years. Having a vested interest in the company, my husband & I have made millions on this stock. The average growth has not been great since going public in 1999. We have all hit hard times. It is still the industry leader and a fantastic testimony to free enterprise, capitalism as it works while remaining dedicated to high standards of public service and customer satisfaction.