Dividend matchup: UPS (UPS) & Fedex (FDX)

By: ispeculatornew
Date posted: 02.09.2011 (5:44 am) | Write a Comment  (0 Comments)

      Post a Comment

One of the very popular posts on this blog in 2010 was the dividend match up between Coca-Cola (KO) and Pepsi (PEP) which is certainly a classic no matter how you look at it. I was looking at finding another match up after comparing McDonald’s (MCD) and Yum! (YUM) a few weeks ago. Then last night I saw what almost looked like a race between a UPS (UPS) truck and a Fedex (FED) one which certainly seemed like an interesting one to look into. They are in very different classes regarding their dividends (only one makes the top dividend paying stocks list) but that could change fairly quickly so we decided to take a look following the 20 things that we look at when valuing dividend stocks.

Dividend Metrics

[table “246” not found /]

There is not much of a contest here as UPS pays a dividend yield almost 4 times higher with slower but very comparable growth. Sure, Fedex has been increasing its dividend more quickly by about 1.50% in the past five years but it would take a very long time to catch up if the discrepancy remains the same. The difference has been larger in the most recent year but I still must give a significant advantage to UPS here.

Company Metrics

[table “247” not found /]

As you can imagine, this is the opportunity for Fedex to catch up and it seems to do exactly that. Sales growth, a critical component as I discussed in the past is 1.40% higher, which is significant. All of the profitability numbers are difficult to analyze because of the effects of the recent economic turmoil but if you look at the payout ratio, you will see just how much Fedex could improve its dividend payout if it ever decided to close the gap more quickly.  The return on equity seems comparison seems exaggerated and both have almost no debt. So I would give the edge to Fedex quite clearly here although probably not enough to close the gap from the dividend metrics.

Stock Metrics

[table “248” not found /]


In technical terms, UPS is the better buy at the moment although not by very much and it probably does not create a big change given how one sided the analysis had been in the past.

Industry Metrics and Portfolio Fit

Both of these companies operate in exactly the same business, face the same struggles and are somewhat dependant on the economic growth to improve sales and be able to sustain dividend growth in the long term. There isn’t much of a difference between the names but since Fedex is more about potential than UPS, I would only consider it in a strong and diversified passive income portfolio while more recent/beginner dividend portfolios would probably be better off with the more important payout offered by UPS.

If you liked this post, you can consider subscribing to our free newsletters here


No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.