UPS's stock price has fallen to a 5-year low. Is this wave worth buying the dip?

The established logistics giant UPS has been up to something recently. Its stock price fell 25% at the beginning of the year, but the CEO is working hard to make a major shift - moving away from low-margin clients like Amazon to focus on small and medium-sized enterprises and high-end international logistics.

Core Points:

1️⃣ The turnaround has only reached one third. The major reforms starting from January 2025 will not be completed until 2027. Q3 data looks good (US revenue per item increased by 9.8%), but 93 distribution centers have closed, and the business volume has declined by 21% compared to Amazon. The market has not yet bought into this “growing pain”.

2️⃣ A 7% dividend yield is a double-edged sword. A historically high dividend yield is indeed tempting, but the payout ratio has reached 98%, indicating significant cash flow pressure. However, UPS guarantees that it will continue to pay dividends (this is a core principle of the company), and it is expected that profit growth will reach 11% by 2027, at which point the pressure on dividends will ease.

Investor Perspective: UPS is on the “operating table”; the current slump is exchanged for future growth. High dividends coexist with turnaround risks - it depends on whether management can deliver on promises.