Is it time to finally give up on UPS after high-yield dividend stocks hit a first speed in four years?
United Parcel Service (NYSE: UPS) Shares fell 14.1% on January 30th after the company reported disappointing its fourth quarter and full-year results for 2024. Currently, stocks are at their lowest level since July 2020.
The dividend rise, combined with the stock that beat the stock, has risen to a delicious 5.9%, at the time of this writing. However, given the company’s challenges, some investors may wonder if high yields are too good.
This is where UPS didn’t work. Why UPS is a high yield, while it can get worse before it gets better Dividend Stocks It’s worth buying now for patient investors.
Let’s go back to March 2024. UPS stocks were hovering at their lowest range for the first time in three years. To regain the trust of investors, management hosted an investor presentation detailing how to get the business back on track over the next three years.
UPS had been overestimating the amount of packages delivered so much that it believed that e-commerce’s Covid-19-induced increase would lead to sustained growth. Or, at the very least, consumers will adapt their behavior permanently to incorporate more purchases online. So UPS over-expanded routes and placed business for demand that never met expectations.
In an investor presentation, UPS adjusted the average delivery volume of small packages in 2026 to 98 million packages, compared to the initial estimate of 108 million packages by 2023. The target implied something much more rational. 5.5% Combined annual growth rate Between 2023 and 2026. In the presentation, UPS forecasts revenues of between $100 billion and $114 billion in 2026, compared to revenues of $91 billion in 2023. The idea was to expand revenue in 2024 and focus more on margins in 2025 and 2026.
Unfortunately, UPS was unable to fulfill its promise in 2024. We increased our revenues by just 0.1%, lowered our operating profit margin, and diluted earnings per share fell by 12.1%. In other words, the UPS is moving in the wrong direction – putting its 2026 target at risk.
UPS is already struggling, so investors were caught off guard when the company announced a major change in relations with Amazon (NASDAQ: AMZN). Despite Amazon being UPS’s biggest customer, UPS expects to cut Amazon’s volume by 50% by the second half of 2026. The move could strengthen margins, but it is at the expense of revenue. UPS CEO Caroltome said the following regarding the revenue call:
We have been affiliated with Amazon for nearly 30 years and appreciate the company. Amazon is our biggest customer, but it is not our most profitable customer. That margin is extremely tenuous for domestic US businesses. The Amazon contract has appeared this year. And we said it was time to retreat for a while and reassess our relationship. Because if we don’t take action, it’s likely that returns will decrease. So we looked at many different options and set out what we think is the best option for our company. It is to accelerate their volume glide along with us, as I commented in a statement prepared by June. 2026.