Should You Consider Purchasing United Parcel Service Now That Its Price Is Under $120?

United Parcel Service: An Overview for Dividend Investors

United Parcel Service (NYSE: UPS) stands as one of the leading global package delivery providers, boasting a vast and irreplaceable logistics network. With a substantial dividend yield of 6.5%, many income-focused investors are drawn to UPS, especially as its share price hovers near $100. But is this an opportunity worth pursuing?

Key Considerations for Dividend Seekers

Despite its appealing yield, UPS's dividend payout ratio raises concerns. By the close of 2025, the company’s trailing 12-month payout ratio exceeded 100%, meaning all profits were allocated solely to dividends. This scenario heightens the possibility of a future dividend reduction.

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Fortunately, dividends are paid from cash flow rather than earnings, so a payout ratio above 100% can persist temporarily without forcing a cut. UPS has indicated plans to keep its dividend steady through 2026. Nevertheless, cautious dividend investors should remain vigilant.

UPS’s Transformation Strategy

UPS is currently undergoing a significant transformation, focusing on cost reduction, modernization, and prioritizing its most profitable clients. Given the scale and complexity of its operations, these changes are challenging. As a result, expenses are elevated and revenue is intentionally declining as less profitable customers are phased out. Notably, UPS is proactively decreasing its dependence on Amazon (NASDAQ: AMZN), which is increasingly handling its own deliveries.

The company anticipates that 2026 will mark a turning point, with stronger performance expected in the latter half of the year. A positive sign is the rising revenue per package in its U.S. segment, indicating that the turnaround is beginning to yield results.

Is UPS a Buy Right Now?

For investors willing to take on more risk, UPS may be attractive at its current valuation. However, the transformation is ongoing, and industrial stocks are subject to economic cycles. Uncertainties in the global economy or geopolitical tensions could delay the anticipated turnaround. Those with a more conservative approach may prefer to wait until UPS’s restructuring is further advanced.

Should You Invest in UPS Right Now?

Before making a decision on UPS shares, consider this:

• The Motley Fool Stock Advisor team recently revealed their picks for the 10 top stocks for investors right now—and UPS was not among them. These selections have the potential for significant gains in the years ahead.
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*Stock Advisor performance as of March 16, 2026.

Reuben Gregg Brewer does not hold positions in any of the stocks discussed. The Motley Fool owns shares of and recommends both Amazon and UPS. For more information, see The Motley Fool’s disclosure policy.

Should You Buy United Parcel Service While It's Below $120? was first published by The Motley Fool.