As mentioned in my previous post I currently own AT&T, Phillip Morris International, 1st Source Bank, Southern Company, Fastenal, Proctor & Gamble, Coca-Cola, and an Eaton Vance income fund. These securities generated over $1000 in dividend income for 2015. Assuming I can allocate the remainder of my portfolio in 2016; this number should rise astronomically.
My most recent allocation was none other than United Parcel Service (UPS). UPS is the largest package delivery and supply chain management company in the world. Although UPS has only been listed on the NYSE for a few years the company has been in business for over a century. Since its founding in 1907 UPS has grown to deliver over 15 million packages a day. Most of us can’t go one day without seeing “something” UPS. These guys are everywhere!
Looking at the metrics…UPS reported revenues in excess of $58 billion and an EPS of $5.43 in 2015. Based on these figures, the company’s P/E is approximately 17.3 as of February 2016. Last year UPS paid a quarterly dividend of $0.73 per share; amounting to a yield of approximately 3.2%. Overall UPS has a consistent record of revenue growth and dividend increases. For instance, in 2016, they increased the quarterly dividend payout by 6.8%.
For security analysis I typically defer to Value Line. As of February 2016 Value Line gave UPS a financial strength rating of “A”. They also rate them as a “1” in terms of safety and “2” for timeliness. In terms of Value Line “1” is the safest rating a company can earn. Timeliness estimates how well a security will perform relative to other companies. Overall, Value Line estimates UPS to be a very safe, strong performing company. They estimate an annual return between 10-15%. By 2019-2021 the projected price was between $130-160.
UPS had a great year with a 27% earnings increase in just quarter four alone. Industrial demand was sluggish but consumer e-commerce orders really took off. However, information that made my stomach churn concerned Amazon. Amazon is UPS’s largest customer but is now becoming somewhat of a competitor. According to a Bloomberg report Amazon is proceeding with a plan to help international suppliers to transport packages to the U.S. There are also reports of Amazon leasing planes and registering an ocean freight booking business.
Given the information I had available I went ahead and purchased 20 shares of UPS at $97.34 per share. I liked the financial metrics and I admire the company. I deal with UPS on a daily basis at work. Working in industrial supplies I routinely have to ship product to customers in a timely fashion. To this day UPS has never failed me. I’m glad UPS is part of my portfolio and I look forward to being part of their business!
DISCLAIMER: I am not a licensed investment advisor or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.