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2 Dividend-Paying Air Freight & Cargo Stocks You May Count On

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The Zacks Transportation - Air Freight and Cargo industry stands to benefit from higher shipping rates. Even though economies have reopened, the demand for online shopping is high among consumers. The buoyant demand scenario is pushing up shipping rates, which augurs well for industry participants.

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.

Among the air freight and cargo players, United Parcel Service, Inc. (UPS - Free Report) and FedEx Corporation (FDX - Free Report) 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?

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%. 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 $155.82 billion.

UPS pays out a quarterly dividend of $1.62 ($6.48 annualized) per share, which gives it a 3.60% yield at the current stock price. This company’s payout ratio is 47% of its earnings at present. The five-year dividend growth rate is 11.02%. (Check United Parcel Services’ dividend history here).

UPS’ strong free cash flow-generating ability is encouraging, supporting its shareholder-friendly activities. In 2022, UPS generated a free cash flow of $9,038 million. Robust free cash flow generation by UPS is a major positive, leading to an uptick in shareholder-friendly activities. Notably, UPS paid dividends worth $5,114 million and repurchased shares worth $3,500 million in 2022. In 2023, UPS expects to make dividend payments of $5.4 billion and repurchase shares worth $3 billion.

Concurrent with the fourth-quarter 2022 earnings release, UPS’ board of directors raised its quarterly cash dividend to $1.62 per share, effective from the first quarter of 2023. This marks the 14th consecutive year of a dividend increase. The raised dividend will be paid out on Mar 10, 2023, to all its shareholders of record as of Feb 21, 2023. Additionally, UPS has approved a $5-billion share repurchase authorization, replacing the company’s existing authorization.

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 $51.31 billion.

FDX pays out a quarterly dividend of $1.15 ($4.60 annualized) per share, which gives it a 2.26% yield at the current stock price. This company’s payout ratio is 25% of its earnings at present. The five-year dividend growth rate is 11.72%. (Check FedEx’s dividend history here).

FedEx Corporation Dividend Yield (TTM)

FedEx Corporation Dividend Yield (TTM)

FedEx Corporation dividend-yield-ttm | FedEx Corporation Quote

We are impressed by FedEx’s efforts to reward its shareholders through dividends and buybacks. During the first half of fiscal 2023, FedEx repurchased shares worth $1,500 million (higher than $748 million worth of shares bought in the first half of fiscal 2022) and paid dividends worth $598 million (higher than $400 million dividend payout in first-half of fiscal 2022). During fiscal 2022, FedEx repurchased shares worth $2.248 billion (against no share buybacks in fiscal 2021) and 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 also positively impact earnings per share.


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