{"id":27647,"date":"2026-04-17T05:44:58","date_gmt":"2026-04-17T05:44:58","guid":{"rendered":"https:\/\/finderica.com\/?p=27647"},"modified":"2026-04-17T05:44:58","modified_gmt":"2026-04-17T05:44:58","slug":"can-ups-keep-delivering-for-investors","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=27647","title":{"rendered":"Can UPS Keep \u201cDelivering\u201d for Investors?"},"content":{"rendered":"
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United Parcel Service<\/strong> (NYSE: UPS) is an interesting dividend growth stock. It yields 6.4%, and the company has raised its dividend every year for 16 years.<\/p>\n

But UPS is in the process of a big transition.<\/p>\n

It is disentangling itself from Amazon, its largest customer.<\/p>\n

You might think, \u201cWhy in the world would they do that?\u201d<\/p>\n

While delivering packages for Amazon is high-volume, it is also low-margin. UPS is sacrificing the revenue from Amazon going forward in order to focus on more profitable business.<\/p>\n

That will lead to a decline in free cash flow in the near term.<\/p>\n

Last year, UPS\u2019 free cash flow was $5.47 billion. It is forecast to be $5.05 billion this year and fall to $5.01 billion in 2027.<\/p>\n

\"Chart:<\/a><\/p>\n

That\u2019s a problem. Declining free cash flow causes companies\u2019 Safety Net ratings to drop.<\/p>\n

Another issue is that the payout ratio is too high.<\/p>\n

Last year, UPS paid shareholders $5.4 billion, or 99% of its free cash flow. In 2026 and 2027, the payout ratio is projected to exceed 100%.<\/p>\n

That means the company is paying shareholders more in dividends than it is generating in free cash flow.<\/p>\n

That\u2019s no good.<\/p>\n

In fact, Safety Net only accepts a 75% or lower payout ratio before it starts downgrading stocks.<\/p>\n

Though UPS has boosted its dividend for 16 years in a row, it is unlikely to do so this year as it goes through this transition.<\/p>\n

But management knows it has a lot of former employees as shareholders since it was an employee-owned company prior to 1999. As a result, Brian Dykes, UPS\u2019 chief financial officer, stated, \u201cWhen we look across our shareholder base, we recognize that the dividend is important, right? And so we will protect the dividend.\u201d<\/p>\n

Now, Safety Net doesn\u2019t care what a CFO says. It goes by the numbers.<\/p>\n

Falling free cash flow and a payout ratio over 100% mean the dividend is not safe. For that reason, UPS gets a low mark for dividend safety.<\/p>\n

However, I don\u2019t expect a dividend cut in the next 12 months. If free cash flow is worse than expected this year, that could lead to a reduction in 2027, though I do believe management will do everything it can to avoid it.<\/p>\n

<\/a>Of course, if the company is able to become more profitable as a result of this transition away from Amazon, that could boost its free cash flow, which would greatly improve its dividend safety.<\/p>\n

Dividend Safety Rating: F<\/strong><\/p>\n

\"Dividend<\/p>\n

What stock\u2019s dividend safety would you like me to analyze next? Leave the ticker in the comments section.<\/p>\n

You can also take a look to see whether we\u2019ve written about your favorite stock recently. Just click on the word \u201cSearch\u201d at the top right part of the Wealthy Retirement<\/em> homepage, type in the company name, and hit \u201cEnter.\u201d<\/p>\n

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.<\/p>\n<\/p><\/div>\n