United Parcel Service (UPS) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight, facilitating international trade, and deploying advanced technology to more efficiently manage the world of business, explains Ingrid Hendershot, value-oriented money manager and editor of Hendershot Investments.
Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide. UPS has a flexible capital allocation strategy which allows the company to reinvest in its business, make dividends a priority and take a balanced approach to share repurchases.
Long-term investors should package up UPS for their portfolio. Since going public in 1999, UPS has parceled out brown boxes of free cash flow to shareholders via dividends and share buybacks which have totaled more than $73 billion.
UPS increased its dividend 10% in 2018 to an annual rate of $3.64 per share with the dividend currently yielding an attractive 3.7%. UPS has either increased or maintained its dividend every year for nearly 50 years.
During the next few years, UPS plans to annually invest $6.5 billion to $7 billion, about 10% of revenues, in new technology, aircraft and automated capacity, taking advantage of the 100% deductibility permitted for capital investments under the new tax law.
At the same time, UPS expects to continue to increase its dividend and plans to repurchase $1 billion of its shares in 2018. Management reaffirmed 2018 adjusted EPS in a range of $7.03-$7.37, which represents high double-digit growth.
Operating cost reductions between 2018 and 2022 should result in an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20 by 2022.
UPS — my top pick for conservative investors in 2019 — is a high-quality, highly profitable market leader with strong cash flows, an attractive dividend and a solid outlook for growth.
