Should You Buy United Parcel Service While It's Below $120?

United Parcel Service (NYSE: UPS) is 1 of the world's largest bundle transportation companies. It has a web that would beryllium difficult, if not impossible, to replace. Add successful a lofty 6.5% dividend yield, and you tin spot wherefore income investors would beryllium funny successful buying the banal portion it is trading adjacent $100 per share. Is it worthy it?

While UPS has an charismatic yield, its payout ratio is alternatively unattractive. At the extremity of 2025, the trailing 12-month dividend payout ratio was implicit 100%. That materially increases the hazard of a dividend cut, fixed that it would necessitate each of the company's net to screen conscionable the dividend.

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Luckily, dividends aren't paid retired of earnings. They are paid retired of currency flow, truthful a payout ratio tin emergence supra 100% for a play without triggering a dividend cut. As it stands, UPS is signaling that it intends to support the dividend astatine its existent level successful 2026. Still, blimpish dividend investors whitethorn privation to tread with caution.

The existent issue, however, is the turnaround UPS is presently implementing. It is cutting costs, modernizing and streamlining, and refocusing connected its highest-profit customers. Its concern is immense and complex, truthful this is nary casual task. Right now, costs are precocious and, by design, the company's apical enactment is falling arsenic it sheds customers that aren't precise profitable to serve. Notably, the institution is pre-emptively reducing its reliance connected Amazon (NASDAQ: AMZN), which has progressively been delivering its ain packages.

The institution believes 2026 volition beryllium the inflection point, with the 2nd fractional of the twelvemonth expected to beryllium stronger than the first. Right now, the large affirmative is the ongoing betterment successful the gross per portion that's taking spot successful the U.S. business. It is an aboriginal motion that the company's turnaround efforts are having the intended impact.

For much assertive dividend investors, UPS could beryllium worthy buying portion it is trading astir $100. However, the turnaround is inactive underway, and the concern assemblage is cyclical. Given the uncertainty astir the system and geopolitical events, a recession could easy propulsion this turnaround's inflection constituent further into the future. More blimpish dividend investors whitethorn privation to support UPS connected the privation database until the turnaround is further along.