United Parcel Service (UPS) 2013 Review

United Parcel Service (UPS) is the world’s largest integrated air and ground package delivery service, operating in over 200 countries. The company also offers specialized transportation and logistics services. UPS had grown its dividends and profits  at a 5-11% pace in the last ten years earning a 20%+ return on equity.  UPS should be able to generate above earnings growth as a result of:

(1) rising e-commerce sales,

(2) price increases, ,

(3) its continued investment in technology and service enhancements,

(4) its effort to raise its health care distribution business which is expected to grow at a well above average pace,

(5) an ongoing share repurchase program.

Negatives:

(1) it is in a highly competitive industry,

(2) approximately 60% of its work force in unionized subjecting it to the risks of work stoppages and slowdowns,

(3) its international exposure increases the risks of economic difficulty from both the EU and the more volatile emerging markets,

(4) slow US economic growth.

UPS is rated A by Value Line, has a 59% debt to equity ratio and its stock currently yields about 3.2%.

   Statistical Summary

                  Stock      Dividend         Payout      # Increases  

                  Yield      Growth Rate     Ratio       Since 2003

UPS           3.2%          8%               51%              10

Ind Ave      1.2             14                 14                 NA 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2003      Margin       Rating

UPS           59%           49%           2                 9%            A

Ind Ave      48              15            NA                7             NA

*most companies in UPS industry do not pay dividends

     Chart

            Note:  UPS stock made good progress off its March 2009 low, surpassing the October 2007 high (straight red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term it is in an uptrend (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a full position in UPS; while the High Yield Portfolio owns a 50% position.  The upper boundary of its Buy Value Range is $69; the lower boundary of its Sell Half Range is $89.

http://finance.yahoo.com/q?s=UPS

02/13