The Zacks Transportation - Air Freight and Cargo industry continues to grapple with issues like supply-chain disruptions and higher fuel costs. These are likely to keep the bottom line of the companies in this industrial cohort under pressure.
Despite these challenges, the industry has gained 6% year to date, underperforming the S&P 500 Index’s 10.7% appreciation but outperforming 2.4% growth of the broader Zacks Transportation sector.
We believe the buoyant e-commerce demand scenario is a huge positive for the industry participants. Even though economies have reopened, consumers’ thirst for online shopping is rampant. High shipping rates should also drive revenues.
Given this backdrop, let’s focus on some air freight and cargo stocks — United Parcel Service, Inc. (UPS - Free Report) and FedEx Corporation (FDX - Free Report) — which have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet, and some value characteristics.
How to Pick Stocks With Solid Dividend Payouts?
We have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the two stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FedEx: Based in Memphis, TN, FedEx provides transportation, e-commerce, and business services in the United States and internationally. Currently, the stock has a market capitalization of $56.34 billion.
FDX pays out a quarterly dividend of $1.26 ($5.04 annualized) per share, which gives it a 2.05% yield at the current stock price. This company’s payout ratio is 27% of its earnings at present. The five-year dividend growth rate is 12.72%. (Check FedEx’s dividend history here).
FedEx has been consistently making efforts to reward its shareholders through dividends and share buybacks, which are encouraging. During the first nine months of fiscal 2023, FedEx paid dividends worth $888 million (higher than $598 million in the first nine months of fiscal 2022). During fiscal 2022, FedEx paid dividends worth $793 million (higher than the $686 million dividend payout in fiscal 2021). Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but positively impact earnings per share.
United Parcel: Headquartered in Atlanta, GA, United Parcel provides transportation and delivery, distribution, contract logistics, ocean freight, air freight, customs brokerage, and insurance services. Currently, it has a market capitalization of $147.36 billion.
UPS pays out a quarterly dividend of $1.62 ($6.48 annualized) per share, which gives it a 3.78% yield at the current stock price. This company’s payout ratio is 54% of its earnings at present. The five-year dividend growth rate is 12.60%. (Check United Parcel’s dividend history here).
UPS’ strong free cash flow-generating ability supports its shareholder-friendly activities. In first-quarter 2023, UPS generated a free cash flow of $2,357 million. In 2022, UPS generated a free cash flow of $9,038 million. Robust free cash flow generation is a major positive, leading to an uptick in shareholder-friendly activities. Notably, UPS paid dividends worth $1,348 million and repurchased shares worth $751 million in first-quarter 2023. In 2022, UPS paid dividends worth $5,114 million and repurchased shares worth $3,500 million. In 2023, UPS expects to make dividend payments of $5.4 billion and repurchase shares worth $3 billion.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
The Zacks Transportation - Air Freight and Cargo industry continues to grapple with issues like supply-chain disruptions and higher fuel costs. These are likely to keep the bottom line of the companies in this industrial cohort under pressure.
Despite these challenges, the industry has gained 6% year to date, underperforming the S&P 500 Index’s 10.7% appreciation but outperforming 2.4% growth of the broader Zacks Transportation sector.
We believe the buoyant e-commerce demand scenario is a huge positive for the industry participants. Even though economies have reopened, consumers’ thirst for online shopping is rampant. High shipping rates should also drive revenues.
Given this backdrop, let’s focus on some air freight and cargo stocks — United Parcel Service, Inc. (UPS - Free Report) and FedEx Corporation (FDX - Free Report) — which have consistently announced dividend hikes, thus highlighting their pro-shareholder stance.
Stocks that have a strong history of dividend growth belong to mature companies, which are less susceptible to large swings in the market and act as a hedge against economic or political uncertainty as well as stock market volatility. At the same time, they offer downside protection with their consistent increase in payouts.
Additionally, these companies have superior fundamentals. These include a sustainable business model, a long track of profitability, rising cash flows, good liquidity, a strong balance sheet, and some value characteristics.
How to Pick Stocks With Solid Dividend Payouts?
We have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%. Each of the two stocks mentioned below carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FedEx: Based in Memphis, TN, FedEx provides transportation, e-commerce, and business services in the United States and internationally. Currently, the stock has a market capitalization of $56.34 billion.
FDX pays out a quarterly dividend of $1.26 ($5.04 annualized) per share, which gives it a 2.05% yield at the current stock price. This company’s payout ratio is 27% of its earnings at present. The five-year dividend growth rate is 12.72%. (Check FedEx’s dividend history here).
FedEx has been consistently making efforts to reward its shareholders through dividends and share buybacks, which are encouraging. During the first nine months of fiscal 2023, FedEx paid dividends worth $888 million (higher than $598 million in the first nine months of fiscal 2022). During fiscal 2022, FedEx paid dividends worth $793 million (higher than the $686 million dividend payout in fiscal 2021). Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but positively impact earnings per share.
United Parcel: Headquartered in Atlanta, GA, United Parcel provides transportation and delivery, distribution, contract logistics, ocean freight, air freight, customs brokerage, and insurance services. Currently, it has a market capitalization of $147.36 billion.
UPS pays out a quarterly dividend of $1.62 ($6.48 annualized) per share, which gives it a 3.78% yield at the current stock price. This company’s payout ratio is 54% of its earnings at present. The five-year dividend growth rate is 12.60%. (Check United Parcel’s dividend history here).
UPS’ strong free cash flow-generating ability supports its shareholder-friendly activities. In first-quarter 2023, UPS generated a free cash flow of $2,357 million. In 2022, UPS generated a free cash flow of $9,038 million. Robust free cash flow generation is a major positive, leading to an uptick in shareholder-friendly activities. Notably, UPS paid dividends worth $1,348 million and repurchased shares worth $751 million in first-quarter 2023. In 2022, UPS paid dividends worth $5,114 million and repurchased shares worth $3,500 million. In 2023, UPS expects to make dividend payments of $5.4 billion and repurchase shares worth $3 billion.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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