Transportation - Air Freight and Cargo industry stands to benefit from higher shipping rates. Even though economies are reopening, the demand for online shopping is high among consumers. The buoyant demand scenario is pushing up shipping rates, thus aiding industry participants. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #33, which places it in the top 13% of more than 250 Zacks industries.
Despite the robust demand environment, industry players face quite a few challenges. Supply-chain disruptions and higher fuel costs are likely to keep the bottom line of the companies in this industrial cohort under pressure.
The industry has gained 7.5% over the past three months, compared with the S&P 500 Index’s 8.8% appreciation and 9% growth of the broader Zacks
Transportation sector. Image Source: Zacks Investment Research
Among the Air Freight and Cargo players,
United Parcel Service, Inc. ( UPS Quick Quote UPS - Free Report) and FedEx Corporation ( FDX Quick Quote FDX - Free Report) announced dividend hikes even during the coronavirus-induced uncertainty in 2021, 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?
In order to choose some of the best dividend stocks from the aforementioned industry, 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%. Moreover, 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 United Parcel: Headquartered in Atlanta, GA, United Parcel provides letter and package delivery, transportation, logistics, and related services. Currently, it has a market capitalization of $172.60 billion.
UPS’ strong free cash flow-generating ability is encouraging. It supports UPS’ shareholder-friendly activities. In the first half of 2022, UPS generated a free cash flow of $6,895 million compared with $6,804 million in first-half 2021. Notably, UPS paid dividends worth $2,567 million in first-half 2022 compared with $1,718 million in first-half 2021. UPS aims to reward its shareholders to the tune of $8.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($3 billion).
UPS pays out a quarterly dividend of $1.52 ($6.08 annualized) per share, which gives it a 3.04% yield at the current stock price. This company’s payout ratio is 48% of its earnings at present. The five-year dividend growth rate is 8.81%. (
Check United Parcel Services’ dividend history here). Fedex: Based in Memphis, TN, FedEx provides transportation, e-commerce, and business services in the United States and internationally. Currently, it has a market capitalization of $54.34 billion.
FedEx raised its dividend 53% to $1.15 per share in June 2022. During fiscal 2022, FedEx repurchased shares worth $2.2 billion. The company expects to repurchase shares worth $1.5 billion during the first half of fiscal 2023. Such shareholder friendly moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
FDX pays out a quarterly dividend of $1.15 ($4.60 annualized) per share, which gives it a 2.15% yield at the current stock price. This company’s payout ratio is 15% of its earnings at present. The five-year dividend growth rate is 8.12%. (
Check FedEx’s dividend history here).