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United Parcel Service

United Parcel Service: 4% Yield And Attractive Valuation

United Parcel Service Inc Class B (UPS) has been hit by a double whammy. A weak outlook for 2020 combined with the recent stock market declines due to the coronavirus has punished the stock. It’s down from its peak in mid-November by approximately 20% as of this writing. Simultaneously, the yield is now over 4%. When a stock with a strong brand and franchise like UPS is yielding over 4% it is always time to take examine the stock in a little more detail. I believe that the market is currently undervaluing the stock. The company has attributes that most dividend growth investors should like. UPS is a Dividend Contender, having the raised the dividend for 20 years, and is on the way to becoming a Dividend Champion. The dividend yield is over 4% and well covered by earnings and free cash flow and the stock is undervalued. Hence, I view UPS as a buy.

Overview of United Parcel Service

UPS is the world’s largest parcel delivery company and was founded in 1907. The company is well known for its ubiquitous brown vans that deliver parcels. UPS operates three business segments that are US Domestic Package, International Package, and Supply Chain & Freight. About 61% of total revenue ($74B in 2019) is from Domestic Package, 20% from International Package and 19% from Supply Chain and Freight. Supply Chain & Freight includes less-than-truckload freight delivery, freight forwarding and logistics services. UPS is an integrated international shipping company that has express, ground, air, ocean and freight capabilities. The company’s network includes drop boxes, retail locations, transportation hubs, sorting sites, and IT infrastructure. UPS delivers roughly 21.9 million parcels per day worldwide and 5.5B parcels per year worldwide. UPS is well known worldwide and has the 27th best global brand with a value of $18,072M in 2019 according to Interbrand…

Disclosure: I am long UPS.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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