From an analytical perspective, What stands out here is Should you buy stock in a company with a good chance of missing its full-year guidance and one that could cut its much-admired dividend (currently yielding 6.
In contrast, Usually, that's the last thing investors should want to do. But in the case of UPS (UPS -0 (an important development).
Additionally, On the other hand, 30%) and its upcoming second-quarter earnings announcement on July 29, it makes sense. Here's why.
Conversely, The market doesn't believe UPS will sustain the dividend UPS's dividend yield is 6 (noteworthy indeed), considering recent developments.
6%, and the 10-Year Treasury yield is 4, in light of current trends.
Outside of the COVID-19-led crash in 2020, there's never been a period when the spread between UPS yield and the risk-free rate was this high.
Moreover, Data by YCharts This's the market's way of indicating that it believes the dividend is at risk and may well be cut (something worth watching), amid market uncertainty.
A silver lining But here's the thing: A dividend cut might just be what the company needs.
As previously articulated, UPS has excellent underlying growth spects from in its healthcare, and small and medium-sized revenue.
At the same time, In addition, the plan to reduce low or even negative margin deries for Amazon by 50% from the start of 2025 to mid-2026 makes perfect sense for a company focused on maximizing fitability in its network.
Image source: Getty Images.
The data indicates that would free up cash for investment in these activities, as well as investments in nology to imve its network -- they could even be accelerated, in today's financial world.
It would also reduce the uncertainty surrounding the stock and encourage investors to focus on its growth opportunities, rather than stressing the sustainability of its dividend.
Nevertheless, As counterintuitive as it may sound, if UPS is forced to cut its full-year guidance over concerns raised tariffs and trade conflicts, then reducing the dividend could be a positive move; and investors should, at the least, monitor events closely even if they don't plan on buying in before the earnings report (this bears monitoring).
On the other hand, John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors.
Lee Samaha has no position in any of the stocks mentioned, amid market uncertainty. The Motley Fool has positions in and recommends Amazon and United Parcel Service.
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