Dividend Stock Wednesday: United Parcel Service, Inc (UPS-N)

Written by The Dividend Guy on July 2, 2008

This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

United Parcel Service

United Parcel Service, Inc. is a company sporting a good dividend yield and one that has seen strong dividend growth in the past few years. I have also been a recent customer of theirs a number of time and have been impressed with their service and delivery. As a result, I thought I might have a look at their stock to see if it is worth adding to my Watch List.

As I did on my last dividend stock analysis, I have further updated my stock selection methodology to incorporate another important element in my stock selection criteria. I have now included a dividend growth rate component. To get the point here, a company must have a dividend growth rate what is higher in the current year than it was the year before. This will be a tough metric to pass for many companies, however if they do the rewards to us dividend investors will be great.

13 Points

The Company: United Parcel Service, Inc (UPS-N)

United Parcel Service, Inc. is the world’s largest express carrier, the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services. Their primary business is the time-definite delivery of packages and documents throughout the United States and in over 200 other countries and territories. They have established a vast and reliable global transportation infrastructure, developed a comprehensive, competitive and guaranteed portfolio of services and consistently supported these services with advanced technology.

Dividend Aristocrat (25+ yrs dividend growth)
 No
Dividend Achiever (10+ yrs dividend growth)
 No

THE FUNDAMENTALS

Revenue

UPS - RevenueClick to Enlarge

Revenue Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with Less Than 2 Down Years 0.5
Choppy with Greater Than 2 Down Years 0.0
My Revenue Score 1.0 out of 1.0

Earnings Per Share

UPS - EPSClick to Enlarge

Earnings Per Share Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with Less Than 2 Down Years 0.5
Choppy with Greater Than 2 Down Years 0.0
My EPS Score 0.5 out of 1.0

TOTAL FUNDAMENTALS SCORE: 1.5 out of 2.0

THE RATIOS

Return on Equity

UPS - ROEClick to Enlarge

Return on Equity Scoring

Criteria Scoring
Above 15% for Last 5 Years 1.0
At Least One Year Below 15% in Last 5 Years 0.0
My ROE Score 1.0 out of 1.0

Other Ratios

Ratio Criteria Value Score (Pass=1 / Fail = 0)
Debt to Equity Less Than 0.50 0.85 0.0
Payout Ratio Less Than 60% 308% 0.0
Credit Rating BBB+ AA- 1.0
Total Ratio Score
-
-
1.0 out of 3.0

TOTAL RATIOS SCORE: 2.0 out of 4.0

DIVIDEND DATA
Annual Dividends

UPS - DPSClick to Enlarge

Dividend Growth Years

Criteria Scoring
10+ Years of Dividend Growth 1.0
Less Than 10 Years of Dividend Growth 0.0
My Dividend Growth Years Score 0.0 out of 1.0

UPS - Dividend GrowthClick to Enlarge

Dividend Growth Rate

Criteria Scoring
Current Year Div Growth Greater Than or Equal to Previous Year 1.0
Current Year Div Growth Less Than Previous Year 0.0
My Dividend Growth Rate Score 1.0 out of 1.0

TOTAL DIVIDEND GROWTH SCORE: 1.0 out of 2.0

STOCK VALUATION

Valuation Metric Criteria Value Score (Pass=1 / Fail = 0)
Dividend Yield Cur Yld Greater Than 10 Yr Avg Yld 1.5% 1.0
Div Yld Compared to SPY Div Yld Cur Yld Greater Than SPY Yld 1.8% 1.0
P/E Ratio Cur P/E Less Than 10 Yr Avg P/E 25.0 1.0
Relative P/E Relative P/E Less Than 1.0 0.54 1.0
Price to Sales Less Than 1.5 1.22 1.0
Total Ratio Valuation Score
-
-
5.0 out of 5.0

Expected Return

Criteria Scoring
Expected Return Score Greater Than 10% 10.7%
Expected Return Score Less Than 10% 0.0
My Expected Return Score 1.0 out of 1.0

TOTAL STOCK VALUATION SCORE: 6.0 out of 6.0

TARGET PRICE
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price

Buy Zone
 Maybe Zone
 Sell Zone
 Current Price Rating Scoring (Buy=1.0, Other=0.0)
$48.29 to $63.45
$63.45 to $78.60
$78.60 to $93.76
$60.36
Buy
 2.0

TOTAL TARGET PRICE SCORE: 2.0 out of 2.0

SUMMARY

Points Earned:

12 out of 16 - half points are rounded down to be conservative

The stock is rated Medium with 12.5 points earned through my analysis of the stock. This is a case where the valuation of the company is strong but the history of company performance is just not adding up yet. If the most recent history of the stock is any guide for the future then there should be good things to come for this stock. However, being the patient investor that I am I am going to wait to see one more year of dividend growth and a payout ratio that is better in line with where it should be. I am not going to add it to my watch list yet, but might in 2009.

Rating Points Required
High 14+ points
Medium 10-13 points
Low Less Than 10 points

Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

The Dividend Guy does not own shares in UPS


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9 Comments so far

  1. moneygardener July 2, 2008 8:44 am

    I really like UPS long term and at these levels I am interested.

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  3. Sara - PensionComparison.com July 3, 2008 3:12 pm

    Thanks for the detail, as always!

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  7. united parcel service July 22, 2008 7:03 am

    […] Dividend Stock Wednesday: United Parcel Service, Inc (UPS-N)I have also been a recent customer of theirs a number of time and have been impressed with their service and delivery. As a result, I thought I might have a look at their stock to see if it is worth adding to my Watch List. … - […]

  8. make money online July 26, 2008 10:50 am

    make money online…

    Wonderful. Thanks very much for answering the questions that I had in your blog….

  9. Louise August 14, 2008 8:31 am

    I have owned UPS Stock for 30+ years. Having a vested interest in the company, my husband & I have made millions on this stock. The average growth has not been great since going public in 1999. We have all hit hard times. It is still the industry leader and a fantastic testimony to free enterprise, capitalism as it works while remaining dedicated to high standards of public service and customer satisfaction.

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