Thursday, May 16, 2019

Vodafone Cuts Dividends to Shareholders

On Tuesday of this week, British Company Vodafone (VOD) cut its dividend by 40%. Not surprisingly, this dividend cut occurred several months after its Chief Financial Officer had stated that the dividend will not be cut. The dividend is cut due to several factors such as the need for cash to invest in 5G, and to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania

Vodafone (VOD) had been an international dividend achiever, with an almost 30-year history of annual dividend increases. The last five years saw dividend growth slow down to 2%/year. This was a decrease from the 7% annual growth in the preceding five years.

I own a few shares of Vodafone, because of investments I made in 2013. Because of the low amount of shares I own, it would not be cost effective to sell. If I owned a more material amount of shares however, valued around $1000 or more, I would likely sell and reinvest the proceeds elsewhere. Verizon may be a decent option.

You may enjoy the dividend stock analysis of Vodafone from the time I was considering the investment.

The major reason I invested in Vodafone was because of the value opportunity at play. Vodafone distributed shares of Verizon it had acquired as a result of the sale of its stake in Verizon Wireless to the parent company. What was a value play initially, turned out to be a slightly longer term investment.

I have not been a big fan of telecom companies in general throughout the years. This has somewhat been influenced by the fact that I have spent quite a few years working in the sector. This means that it made little sense to also load up my portfolio with telecom stocks. I have not been very enthusiastic about the sector in general too, but I have had exposure to it through my investment in Verizon (VZ), Vodafone and even AT&T (T) from time to time ( I used to follow an options strategy, which I stopped due to hassle factor, despite consistent profitability). I also view technological changes as a negative for the telecom sector.

However, I had sold most of my Vodafone shares throughout the years, for one reason or another. The main reason is the fact that I consolidated a lot of my retirement plans, and ended up buying funds with the proceeds. I ultimately kept only a small position from a legacy retirement account.
I thought of walking you through my history with this company. I like to discuss and share my mistakes, because I view them as learning opportunities. I believe that embracing mistakes and learning from them is ultimately what separates the people who are able to succeed in long-term investing from those who do not stick with it.

It turns out that I invested $200 in Vodafone on October 7, 2013. I used Sharebuilder – I believe that I paid $1/investment back then, but for some reason the broker states that it was a free trade. I ended up buying 5.70 shares of the telecom giant.

After a dividend reinvestment, I received shares of Verizon, which were spun off from Vodafone, or 1.5227 to be exact. Following this distribution, Vodafone enacted a 6:11 reverse split in its shares. The reverse split reduced the number of Vodafone shares from 5.79 to 3.16. I then kept reinvesting Verizon and Vodafone distributions until 2018. This was the time when Etrade decided to buy the brokerage business of Sharebuilder (now Capital One). As a result, there was a time when dividends were received in cash and fractional shares had to be sold before the transition.

I had 3.88 shares of Vodafone at the time, which meant I ended up selling 0.88 shares at $24.22/share or a total of $21.31. I also received a dividend of $4.56 in August 2018, prior to the remaining 3 shares being sent to Etrade. After February’s dividend I am left with 3.0898 shares, with a grand total value of $49.62 as of 5/15/2019.

I had 1.85 shares of Verizon, which meant I ended up selling 0.85 shares at $51.59/share for a total of 43.85. I also received $1.69 in dividends until the one share of Verizon was transferred out to Etrade. After May’s dividend I am left with 1.02161 shares worth a grand total of $58.04.

Overall, that $200 investment from October 2013 is now worth a whopping $179.07. If Sharebuilder hadn’t moved the assets over to Etrade and I didn’t have to sell fractional shares or receive dividends in cash, I would assume I would have still had a small loss on this investment. The largest point is that from an opportunity cost of view, I missed out on gain in some of the US Dividend Champions or Aristocrats over these five years. I did learn (or reiterate in a way) a few lessons on my portfolio building and strategy process.

Some random reader might laugh at these comically low dollar amounts I am discussing here. It makes it seem like my portfolio is an amateurish endeavor. Yet, they would be missing the forest for the trees with this comment. I am discussing low dollar amounts, because I ended up owning only a small amount in the company relative to total portfolio size. I bought a stock where I was ultimately wrong. I minimized the impact of the error by having a very small amount invested in the future dividend cutter Vodafone. When I build a position, I scale in slowly. If the story changes, or I lose confidence in management or there are better opportunities, I divert my capital elsewhere. This is how I end up with a lot of small holdings, which is a great way to monitor investments.

I think that the lesson for me is to invest small amounts regularly in a collection of dividend paying stocks, which meet my criteria. This way, I am able to diversify my exposure and not be exposed to the fortunes or lack thereof of a single company. In addition, by investing regularly, I am building my position slowly and over time. As a result, I am able to view negative changes and deteriorating conditions as I go through my leisurely accumulation of the position. As I view these conditions, and I see that the stock no longer meets my entry criteria, I stop accumulating. This is why I have so many small positions scattered around – they looked good at a time, but due to changes in the environment, I stopped adding to them. Therefore, I limited that amount of capital at risk. I rarely sell, which is a good thing, because on the flip side, I never know which of my investments will be my best one.

On the other hand, building positions slowly also exposes me to the risk that I identify a great company, but by the time I am able to accumulate the target position amount the stock price is too overvalued. As a result, I am stuck with a small position relative to what I would want it to be.

I also tend to accumulate dividends in cash, and pool them together with new cash deposited into my brokerage account, in order to make investments in the best values at the moment. This further helps me to diversify investments per sector, geography and over time. If I had simply let dividends accumulate in cash from Vodafone and Verizon, I would have been left with 3.10 Vodafone shares worth $49.80 and 1.50 shares of Verizon worth $85.20. I would have received $27.07 in cash dividends from Vodafone and $17.20 in cash dividends from Verizon for a total of $179.30. This is very close to what my investments ended being worth after all as well. But in reality, the change is that these funds would have been invested elsewhere and hopefully compounded at a better rate that Vodafone.

So to summarize:

• Keep investing mistakes small
• Spread risk by diversifying in many companies and over time
• Stop investing when story changes
• Keep Spin-offs
• Use dividends elsewhere by reinvesting them selectively in best values of the moment
• Review investing mistakes regularly, in order to learn from them and become a better investor


Relevant Articles:

Should I invest in AT&T and Verizon for high dividend income?
Are these high yield dividends sustainable?
Maintaining Moats in times of Technological Changes
Nine Dividend Paying Stocks I Accumulated in the Past Month

Monday, May 13, 2019

Ten Dividend Stocks Providing Consistent Raises to Shareholders

As part of my monitoring process, I look at the list of dividend increases every week. I usually focus my attention on the companies that have managed to grow dividends for at least a decade. As a result, I didn’t include shares of Tractor Supply (TSCO), which is a company whose story I am monitoring.
I also tend to focus on the companies that are growing dividends by more than a token amount, unless of course I own them. As a result, I didn’t include shares of Microchip Technologies (MCHP), which is raising distributions at a slow rate of less than 1%/year.

For the companies that are left to review, I look at the dividend increase relative to the ten-year average, to determine if dividend increases are moving in the right direction.

I also review the growth in earnings per share and payout ratio, in order to determine if the dividend is safe, and if there is room for further dividend increases down the road.

Last but not least, I also review valuation per my valuation guidelines. Even the best dividend growth stock in the world is not worth buying at excessively high valuation levels.

These are very similar to the criteria I use in my dividend stock analyses. The ideas I use to review companies are also the same types of attributes I use to put companies on the list for further research, to hold off until the right price or to quickly discard into the ‘too hard” box.

One of the reasons why I share these lists is to illustrate my criteria in action, hope to educate others about tools they could implement into their own process. Speaking of process, I find it very important to develop your own process, and to follow it, by continuously improving it as well.

Over the past week, there were several companies that increased dividends. Aside from the ones I already mentioned in a previous post, the companies in todays review include:

Chesapeake Utilities Corporation (CPK), a diversified energy company, engages in regulated and unregulated energy businesses. The company operates in two segments, Regulated Energy and Unregulated Energy.

The company hiked its quarterly dividend by 9.50% to 40.50 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. During the past decade, this company has been able to grow distributions at an annual rate of 5.70%.

Chesapeake Utilities managed to boost earnings from $1.43/share in 2009 to $3.45/share in 2018. Chesapeake Utilities is expected to earn $3.70/share in 2019.

The stock is overvalued at 25.70 times forward earnings and yields 1.70%.

Expeditors International of Washington, Inc. (EXPD) provides logistics services in the Americas, North Asia, South Asia, Europe, the Middle East, Africa, and India.

The company hiked its semi-annual dividend by 11.10% to 50 cents/share. This marked the 25th consecutive annual dividend increase for this newly minted dividend champion. The latest dividend hike is in line with the ten year average of 10.90%/year.

Between 2009 and 2018, Expeditors International managed to boost earnings from $1.11/share to $3.48/share. Expeditors International is expected to earn $3.55/share in 2019.

The stock is slightly overvalued at 20.80 times forward earnings and yields 2.70%. I will consider reviewing the stock if it drops below $71/share.

MSA Safety Incorporated (MSA) develops, manufactures, and supplies safety products that protect people and facility infrastructures in the oil, gas, petrochemical, fire service, construction, utilities, and mining industries worldwide. It operates through Americas and International segments.
The company approved a 10.50% increase in its quarterly dividend to 42 cents/share. This marked the 48th year of annual dividend increases for this dividend champion. During the past decade, it has managed to grow the annual dividends at a rate of 4.70%/year.

The company managed to grow earnings from $1.21/share in 2009 to $3.18/share in 2018.
MSA Safety is expected to earn $4.82/share in 2019. The stock is overvalued at 22.50 times forward earnings and yields 1.55%.

NACCO Industries, Inc. (NC), operates surface mines that supply bituminous coal and lignite primarily to power generation companies.

The company hiked its quarterly dividend by 15.20% to 19 cents/share. This marked the 34th year of annual dividend increase for this dividend champion. During the past decade, it managed to grow its dividends at a rate of 12.40%/year. From a fundamentals perspective, NACCO is more challenging to analyze, because the company from a decade ago is different from the company today due to two large spin-offs in 2012 and 2017. NACCO earned $5/share in 2018, which was higher than the $4.41/share it earned in 2017 – the first year as a stand-alone company.

The stock is cheap at 9.70 times earnings and yields 1.60%.

Quaker Chemical Corporation (KWR) develops, produces, and markets various formulated chemical specialty products for a range of heavy industrial and manufacturing applications in North America, Europe, the Middle East, Africa, the Asia/Pacific, and South America.

The company raised its quarterly dividend by 4.10% to 38.5 cents/share. This marked the twelfth year of annual dividend increases for this dividend achiever. During the past decade, it has managed to grow distributions at an annual rate of 4.80%/year.

Between 2009 and 2018, the company grew earnings from $1.47/share to $4.45/share.
Quaker Chemical is expected to earn $6.72/share in 2019. The company is overvalued at 30.80 times forward earnings and yields 0.70%.

VSE Corporation (VSEC) operates as a diversified services and supply company in the United States. The company operates in three segments: Supply Chain Management Group, Aviation Group, and Federal Services Group. The company raised its quarterly dividend by 12.50% to 9 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. During the past decade, it has managed to increase dividends by 13.40%/year.

Between 2009 and 2018, earnings per share increased from $2.33 to $3.21/share.
The stock looks attractively valued at 8.70 times earnings, though the current yield looks low at 1.30%.

Weyco Group, Inc. (WEYS) designs and distributes footwear. The company operates through two segments, North American Wholesale and North American Retail. Weyco raised its quarterly dividend by 4.40% to 24 cents/share. This marked the 38th consecutive annual dividend increase for this dividend champion. During the past decade, it has managed to boost distributions to shareholders at an annual rate of 6%.

Between 2008 and 2018, this dividend champion managed to grow its earnings from $1.44/share to $1.97/share. Unfortunately, the record earnings last year were only a few cents higher than the record earnings from 2007 of $1.90/share.

The stock looks attractively valued at 16.50 times earnings and offers a decent yield of 2.90%. The lack of material earnings growth over the past decade or so does not bode well for future dividend growth.

Cardinal Health, Inc. (CAH) operates as an integrated healthcare services and products company in the United States and internationally. The company operates through two segments, Pharmaceutical and Medical. Cardinal Health boosted its quarterly dividend by 1% to 48.11 cents/share. This marked the 24th consecutive annual dividend increase for this dividend achiever. During the past decade, Cardinal Health has managed to increase dividends at an annual rate of 17.50%. Annual dividend growth had slowed down to 3%/year over the past three years. The current rate of annual dividend increases shows that management does not expect much in terms of earnings growth for the next 12 – 36 months.

Cardinal Health is expected to earn $5.09/share in 2019. This is a decent growth from 2009’s earnings of $3.18/share.

At 9.60 times forward earnings, the stock is very cheap. The current yield is 3.90%, and the dividend seems well covered from earnings. However, I dislike the slowdown in dividend growth, and view it as an indication that the business is facing some larger than anticipated challenges. Check my analysis of Cardinal Health for more information about the company.

Connecticut Water Service, Inc. (CTWS), operates as a regulated water company. The company operates through three segments: Water Operations, Real Estate Transactions, and Services and Rentals. The company increased its quarterly dividend by 4.80% to 32.75 cents/share. This marked the 50th year of annual dividend increases for this newly minted dividend king. Over the past decade, it has managed to grow dividends at an annual rate of 3.40%/year.

Connecticut Water Service is expected to earn $2.34/share in 2019, which is higher than the 2009’s earnings of $1.11/share.

I view the stock as very overvalued at 29.80 times forward earnings. The yield is also low for a utility at 1.90%, while the dividend growth is not too exciting either.

Southside Bancshares, Inc. (SBSI) operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. The company boosted its quarterly dividend by 3.30% to 31 cents/share. This marked the 25th consecutive annual dividend increase for this newly minted dividend champion. During the past decade, the company has managed to grow its distributions at an annual rate of 13.70%/year.
Southside Bancshares is expected to earn $2.27/share in 2019.

The stock yields 3.50% and trades at an attractive forward P/E of 15.60 times earnings.

Relevant Articles:

Dividend Kings List
The ten year dividend growth requirement
2019 Dividend Champions List
Valuing Dividend Stocks

Wednesday, May 8, 2019

Eight Dividend Achievers Showering Owners With More Cash

As part of my monitoring process, I review the list of dividend increases every week. I missed doing this on Monday, so I am catching up.

For this review, I included companies with at least a ten year track record of annual dividend increases.  These are the so called dividend achievers. The select few which have at least a 25 year track record of annual dividend increases are the dividend champions.

I also reviewed each company, based on the criteria I use to evaluate investments. These criteria focus on fundamentals, growth and valuation. The companies that raised dividends over the past ten days include:

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines.

The company raised its quarterly dividend by 19.80% to $1.03/share. This marked the 26th year of annual dividend increases for this dividend champion. Caterpillar has been able to boost its distributions at an annual rate of 7.70% during the past decade.

Between 2009 and 2018, Caterpillar managed to grow earnings from $1.43/share to $10.26/share. Caterpillar is expected to earn$12.32/share in 2019.

Right now Caterpillar is attractively priced at 10.70 times forward earnings and offers a current yield of 3.10%.

RLI Corp. (RLI) is an insurance holding company, which underwrites property and casualty insurance in the United States and internationally. The company raised its quarterly dividend by 4.60% to 23 cents/share. This marked the 44th consecutive year of annual dividend increases for this dividend champion. RLI Corp. has been able to boost its distributions at an annual rate of 6.10% during the past decade.

Earnings per share decreased between 2009 and 2018 from $2.16 to $1.43. RLI Corp is expected to earn $2.45/share in 2019.

Right now I find RLI Corp to be overvalued at 33.70 times forward earnings. The stock yields 1.10%.

Healthcare Services Group, Inc. (HCSG) provides management, administrative, and operating services to the housekeeping, laundry, linen, facility maintenance, and dietary service departments of nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States. It operates through two segments, Housekeeping and Dietary.

The company increased its quarterly dividend to 19.75 cents/share. This is a 2.60% increase over the dividend paid during the same time last year. Healthcare Services Group has managed to grow dividends every quarter for 63 quarters in a row. Over the past decade, this dividend achiever has managed to grow dividends at a rate of 7.20%/year.

Between 2009 and 2018, earnings increased from $0.46 to $1.12/share. The company is expected to earn $1.45/share in 2019.

The stock is overvalued at 23.50 times forward earnings and yields 2.40%.

International Business Machines Corporation (IBM) operates as an integrated technology and services company worldwide. Its Cognitive Solutions segment offers a portfolio of enterprise artificial intelligence platforms, such as analytics and data management platforms, cloud data services, talent management, and industry solutions.

IBM raised its quarterly dividend by 3.20% to $1.62/share, This marked the 24th year of consecutive annual dividend increases for Big Blue. Over the past decade, it has managed to boost dividends at an annual rate of 12.60%. Dividend growth is slowing down, because of low earnings growth, threats to the business model and increasing dividend payout ratio.

Between 2009 and 2018, IBM’s earnings per share declined from $10.01 to $9.52. IBM is expected to generate $13.91/share in 2019.

IBM is cheap at 9.90 times forward earnings, yields 4.70% and offers an adequately covered dividend. Given the lack of meaningful earnings growth over the past decade, the decline in revenues and the recent acquisition activity, I would expect future dividend growth to be more subdued. I am not interested in buying the stock today.

UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.

UGI hiked its quarterly dividend by 15.40% to 30 cents/share. This marked the 32nd consecutive annual dividend increase for this dividend champion. Over the past decade. UGI has been able to grow its dividends at an annual rate of 7.30%.

UGI managed to grow earnings from $1.57/share in 2009 to $2.74/share in 2018. The company is expected to generate $2.44/share in 2019.

The stock is overvalued at 21.80 times forward earnings and yields 2.30%.

Regal Beloit Corporation (RBC) designs, manufactures, and sells electric motors, electrical motion controls, and power generation and transmission products worldwide. It operates through three segments: Commercial and Industrial Systems, Climate Solutions, and Power Transmission Solutions.

The company raised its quarterly dividend by 7.10% to 30 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. The latest dividend increase was faster than the ten year average of 5.70%/year.

The stock is attractively valued at 12.70 times forward earnings and yields 1.50%.

Between 2009 and 2018, earnings increased from $2.63/share to $5.26/share. The company is expected to generate $6.42/share in 2019.

Costco Wholesale Corporation (COST) operates membership warehouses.

The company increased its quarterly dividend by 14% to 65 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. The latest increase is also in line with the ten year average increase of 13.40%/year. Between 2009 and 2018, the company grew earnings from $2.47/share to $7.09/share. Costco is expected to earn $7.96/share in 2019.

Costco is a great company I wish I owned. However, it is always available at a premium valuation. Today is no exception, as the stock sells at 30.30 times forward earnings and yields 1.10%. I will likely be a buyer below $160/share.

Leggett & Platt, Incorporated (LEG) designs and produces various engineered components and products worldwide. It operates through four segments: Residential Products, Furniture Products, Industrial Products, and Specialized Products.

The company raised its quarterly dividend by 5.30% to 40 cents/share. This marked the 48th consecutive annual dividend increase for this dividend aristocrat. The company has managed to boost its distributions at an annual rate of 4%/year over the past decade.

Between 2008 and 2018, Leggett & Platt managed to grow earnings from $0.73 to $2.26/share. The company is expected to earn $2.48/share in 2019.

The stock is attractive at 15.70 times forward earnings and a dividend yield of 4.10%.

Relevant Articles:

Stagnant earnings create a risky environment for dividend investors
2019 Dividend Champions List
Dividend Growth Investor Newsletter
- Ten Dividend Growth Stocks For April 2019

Tuesday, May 7, 2019

Dividend Stock Analysis of FedEx (FDX)

FedEx Corp. (FDX) engages in the provision of a portfolio of transportation, e-commerce, and business services. It operates through the following segments: FedEx Express, TNT Express, FedEx Ground, FedEx Freight, FedEx Services, and Other. One of its largest competitors is United Parcel Services (UPS).

FedEx is a dividend achiever with a 17-year record of annual dividend increases. The last dividend increase for FedEx occurred in June 2018, when it hiked quarterly dividends by 30% to 65 cents/share.

Over the past decade, FedEx has managed to grow dividends at an annual rate of 18.30%/year.

Earnings per share increased from $3.60 in 2008 to $12.57 in 2018. The 2018 earnings per share have been reduced by the impact of the new tax law signed in effect in 2017. The one-time impact reduction to EPS was for $4.22/share. On a side note, the company’s year-end is in May, rather than December. FedEx is expected to earn $16.01/share in 2019, which is before any one-time items.

The company has achieved growth through strategic acquisitions. The latest acquisition was that of TNT Express in 2016. FedEx is still working on integrating TNT Express into its operations, in order to generate the synergies and cost efficiencies it projected.

The rise in global economic output over time, should stimulate demand for package deliveries. This won’t be a smooth uptrend of course, given the fact that economies contract occasionally as well. FedEx and UPS are well positioned to ride the increase in online sales over time. The companies have to invest sufficient resources to address peak demand for their services around the holidays.
FedEx generates 43% of revenues in the US. Roughly 70% of revenues are coming from ground transportation and includes FedEx Kinko’s while the rest come from freight services throughout the US.

The international business accounts for 57% of revenues and transports packages in 220 countries.
The company has also managed to repurchase some shares over the past decade, which has helped grow earnings per share.

FedEx became active on the share repurchases front in 2014. Between 2008 and 2013, shares increased from 312 million to 317 million. Since 2013, FedEx has managed to reduce the number of shares all the way down to 266 million.

The dividend payout ratio increased from 12% in 2008 to 18% in 2018. It looks like dividend growth over the past decade was largely driven by growth in earnings per share, with only some support from growing the payout ratio. I believe that the payout ratio can easily grow over the next decade, which could translate into high dividend growth during that time period.

Currently, the stock is attractively valued at 11.30 times forward earnings and yields 1.45%. Based on 2018 earnings, the stock is still attractively valued. FedEx is a cyclical stock, which means that it is better to buy it on a dip. It is also important to remember that cyclical companies are usually cheapest at the top of the cycle, when their earnings are highest. They look their worst at the bottom of the economic cycle, because their earnings are very depressed.

Relevant Articles:

- Five Dividend Increases From Last Week
United Parcel Service (UPS) Dividend Stock Analysis
- Thirteen Dividend Growth Stocks For Further Research
- Dividend Achievers Offer Income Growth and Capital Appreciation Potential



Wednesday, May 1, 2019

United Parcel Service (UPS) Dividend Stock Analysis

United Parcel Service, Inc. (UPS) provides letter and package delivery, specialized transportation, logistics, and financial services. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight.

The company has managed to grow dividends annually since 2009. The last increase was in February 2019, when the dividend was increased by 5.50% to 96 cents/share.

Over the past decade, UPS has managed to grow dividends at an annual rate of 7.30%/year. In other words, the company doubled dividends per share, despite the fact that it didn’t grow them every single year over the past decade.

Between 2008 and 2018, UPS managed to grow earnings per share from $2.94 to $5.51. UPS has announced a 2019 Adjusted EPS Guidance Range of $7.45 to $7.75/share. The range excludes the impact of mark-to-market changes in pension liabilities.

The company generates a little over 60% from US operations, while 20% comes from international. The rest is derived from its supply chain and freight operations. Packages are moved through ground delivery and air delivery ( 83% and 17% respectively). UPS Supply Chain Solutions manage every aspect of global supply chains, including logistics, distribution, transportation, LTL, air freight, ocean shipping, customs brokerage etc..

Revenues can be positively affected by growth in volumes and pricing increases. UPS and FedEx have a strong presence in the US domestic market, essentially operating as a duopoly. This means that it would be very difficult and costly for a competitor to gain market share, and do so in a profitable manner. This bodes well for pricing and margins. Growth will be driven by increasing economic activity over time, and a lot from the rise in ecommerce.

International operations could also be an opportunity for future growth. International operations are expected to grow faster than domestic ones, due to the higher expected growth of international economies.

Growth could also be realized through strategic or bolt-on acquisitions. Given the high market share that UPS has however, it is very likely that these deals will be heavily scrutinized by regulators. A prime example includes the company’s attempt to acquire TNT Express in 2012, which was ultimately scrapped one year later.

Between 2008 and 2018, the company managed to reduce the number of shares outstanding from 1.022 billion to 871 million. A consistent share buyback program gradually increases the percentage ownership for shareholders who keep their shares, at the expense of those who sell their stock to the company. If a business doesn’t overpay for these shares, the remaining shareholders are better off.

The dividend payout ratio increased from 61% in 2008 to 66% in 2018. The forward payout ratio is at 52%.

Currently, UPS trades at 14.10 times forward earnings and yields 3.70%. I find the stock to be attractively valued today.

Relevant Articles:

Thirteen Dividend Growth Stocks For Further Research
- How many individual stocks do I need to consider myself diversified?
- Eight Dividend Growth Stocks Rewarding Investors With a Raise
How I Use Frugality to Accumulate Wealthh

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