It has been a challenging year for delivery giant United Parcel (UPS) and its shareholders. The stock is down 21% this year, missing out on a strong bull market and trailing major indices like the S&P 500 (SPX), which is up 14% over the same period.
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However, the stock is showing early signs of a turnaround and is now showing some strength by bouncing 13% off its 52-week low. I’m bullish on UPS based on its nascent turnaround, its cheap valuation, and its monster 7% dividend yield, which makes it one of the highest-yielding stocks in the S&P 500.
Early Signs of a Turnaround
At the end of October, UPS reported its third-quarter results, with diluted earnings per share declining to $1.55, down from $1.80 a year ago. Consolidated revenue also slipped 3.7% year over year to $21.4 billion. At first glance, the numbers appear uninspiring—yet there are convincing reasons for optimism.
Despite the top-line decline, revenue per piece, a critical performance metric for the delivery giant, jumped 9.8%. Combined with tighter cost controls, this helped lift operating margins by 11 basis points, bringing them to 10% for the quarter.
According to market analysts, this improvement stems mainly from the company’s strategic decision to wind down its less profitable, lower-margin business with Amazon (AMZN) and redirect capacity toward higher-margin segments such as healthcare logistics and international delivery.
The results are already visible. International revenue, supported by a robust 14.8% adjusted operating margin, grew 5.9% year over year to $4.7 billion. The company is also on track to close its acquisition of Andlauer Healthcare Group this month, further strengthening its position in the fast-growing healthcare logistics sector.
At the same time, Amazon-related volume fell 21.2% year-over-year, an intentional “glide-down” that enabled the company to streamline operations by closing 13 facilities and completing a voluntary retirement program. While the reduced contribution from such a major customer naturally pressured revenue, the trade-off is a leaner, more profitable enterprise with healthier margins and a more resilient business mix.
Beyond operational improvements, the stock itself offers compelling value. With a substantial dividend yield and a valuation that appeals to both growth and value investors, the company provides exactly what the market is craving in today’s turbulent environment: strength, stability, and recession-resistant cash flow.
Generic UPS Retains Exotic Valuation
Following a pullback of this magnitude, it’s not surprising that UPS shares now trade at a discount. With 2025 nearly in the books, the stock changes hands at just 13.5x 2025 earnings estimates. Looking ahead, consensus calls for earnings to rise to $7.16 per share in 2026, placing the stock at just under 13x forward 2026 earnings.
That valuation stands out. It is meaningfully lower than the S&P 500, which trades around 22.4x forward earnings, and still below its close competitor, FedEx (FDX), at roughly 14.5x.
The stock has underperformed this year, but much of the damage appears to be reflected in today’s compressed multiple. Given its profitability, low valuation, and ongoing operational improvements, UPS now has a reasonable floor—and considerable room for recovery as the turnaround progresses.
Monster Dividend Yield Supports Bullish Sentiment
UPS currently offers a hefty 7% dividend yield, placing it among the highest-yielding stocks in the entire S&P 500. The payout is striking in today’s market—nearly six times the S&P 500’s average yield of 1.2% and well above the 10-year Treasury yield of 4.1%. It also dwarfs FedEx’s yield of 2.2%, offering more than three times as much income.
Beyond its generous yield, UPS has a strong history of rewarding shareholders. The company has paid a dividend for 26 straight years and raised its payout for 17 consecutive years.
Investors should note, however, that the current dividend payout ratio is relatively high at 87%. While this introduces some risk, I expect the ratio to improve as earnings grow.
So far in 2025, UPS has returned $4 billion to shareholders through dividends and an additional $1 billion through share buybacks. Given the stock’s attractive valuation, these repurchases appear to be a savvy use of capital.
Is UPS Stock a Buy, Sell, or Hold?
On Wall Street, UPS earns a Moderate Buy consensus rating based on nine Buys, eight Holds, and three Sell ratings assigned in the past three months. The average UPS stock price target of $103.40 implies ~10% upside potential from current levels.
A 7% Dividend Makes the UPS Turnaround Worth the Wait
It hasn’t been an easy year for UPS shareholders, but the stock now appears increasingly compelling as early signs of a turnaround emerge. I’m bullish on UPS as it works to become a stronger, leaner, and more profitable company—exiting lower-margin Amazon business while doubling down on higher-value segments like international shipping and healthcare logistics.
The stock also trades at a notably low valuation, and its 7% dividend yield—one of the richest in the S&P 500—offers investors substantial income while they wait for the recovery to accelerate.