Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



4 Billion More Reasons to Like UPS

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

There's at least one silver lining for UPS (NYSE: UPS  ) shareholders who are understandably miffed about the company's failed bid to acquire TNT Express. Thanks to the canceled deal, UPS now finds itself flush with cash. And it plans to pour billions of that treasure into share buybacks in 2013.

It's true that the delivery giant would rather have won the deal. Until just a few weeks ago, UPS was ready to fork over almost $7 billion for the Dutch delivery firm, which would have given it a huge presence in Europe. But regulators nixed the purchase on antitrust grounds, worried that it could unfairly lock out competitors like FedEx (NYSE: FDX  ) from the parcel delivery market. UPS will have to find another way to expand its global footprint.

Still, the canceled bid does free UPS to deliver tons of additional cash to shareholders now. That's why it's no surprise that the company just tripled its forecast for share buybacks in 2013, from $1.5 billion to now $4 billion. By comparison, it spent just $1.6 billion on share repurchases last year.

The company's holiday-quarter results also left UPS with plenty of financial flexibility. It generated $5.4 billion of cash flow in 2012, after accounting for capital expenditures of over $2 billion. Yes, operating margin ticked down by two-tenths of a percent, to 14.1%. But that still trounces FedEx's profitability, which has been trending at around 7% for the year.

And UPS saw solid volume growth, particularly in the U.S., where e-commerce activity is spiking. Overall, average daily package volumes rose by a healthy 500,000 packages in the quarter.

With major acquisitions off the table, shareholders can look forward to owning a greater piece of those solid business results as UPS draws down its pool of outstanding shares. And dividends will keep flowing as well. Shares yield close to 3% right now, on a high, but supportable, payout ratio of 64%.

UPS' management might not be happy about missing out on the TNT Express deal. But as far as second-best options go, shareholders have plenty of reasons to be pleased.

If you're looking for reasons to own some other great dividend payers, let me invite you to read the Fool's special report: "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so just click here and get your copy today.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2227978, ~/Articles/ArticleHandler.aspx, 9/29/2016 8:02:08 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 4:00 PM
UPS $108.21 Down -1.04 -0.95%
United Parcel Serv… CAPS Rating: *****
FDX $175.12 Down -0.33 -0.19%
FedEx CAPS Rating: ****