UPS and FedEx are good dividend stocks, but which should you take?

By:
on Jun 21, 2022
  • UPS and FedEx have fallen by double digits this year.
  • Both stocks boomed during the pandemic.
  • UPS and FedEx raised dividends this year and have strong fundamentals.

United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) are two robust logistics companies. Both companies enjoyed stellar gains during the pandemic as online purchases rose. However, UPS and FedEx are beaten-down stocks this year, thanks to continued economic tightening. UPS is down 19.87% year-to-date, while FedEx has lost 11%. We believe both strong stocks have the qualities investors need to generate value.

UPS ranks as the world’s largest package delivery company. In the first quarter, the company reported $24.38 billion in revenues. The revenue beat $23.80 billion estimates and was higher than $22.91 billion the prior year. The net income also beat estimates. FedEx, a close rival, had a revenue of $23.6 billion in its latest quarter. Both firms maintained their FY22 outlook, despite the ongoing macro concerns. 

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Both UPS and FedEx also rank well in terms of shareholder value generation. Earlier in the year, UPS raised its dividend by 49% following a record 2021. FedEx followed later this month, announcing a dividend hike of 53%. Following their announcements, UPS’s dividend yield is now 3.5%, while FedEx has 2%. Both yields are above the S&P composite.

We think that UPS and FDX are both quality stocks for investors. However, UPS ranks ahead with its sheer higher payout. Also, with an operating margin of 22.9%, UPS could be better positioned to keep its growing dividends. FedEx has a comparable lower operating margin of only 5.6%.

UPS and FedEx stocks technical analysis

Source: TradingView

Technically, UPS and FedEx are under pressure. FedEx is slightly going higher after the recent dividend hike. We believe both stocks will recover as the economic turmoil softens. Both are quality stocks, but we recommend UPS ahead of FDX.

Summary

UPS and FedEx are quality stocks that should be on investors’ radars. UPS ranks ahead, given its higher dividend yield and operating margin.

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