United Parcel Service (UPS -1.01%) delivers roughly 22.4 million packages each business day to more than 10 million recipients in over 200 countries and territories. It owns and operates a fleet of 135,000 vehicles and 291 jets (plus another 243 jets chartered or leased).
But those statistics don't matter very much to disheartened UPS shareholders. The number that probably resonates more with them is 63%. That's how much the industrial stock has plunged from its high in early 2022 as of the market close on Sept. 16.
Unfortunately, UPS stock keeps falling. What should investors do?
What's behind UPS' decline?
Some of UPS' steep sell-off since early 2022 is the result of package shipping volumes coming down following a surge during the COVID-19 pandemic. This downturn eventually morphed into what some called a "global freight recession."
These headwinds caused UPS to experience its worst one-day drop ever in July 2024 after missing Wall Street's consensus earnings estimate. It didn't help matters that the company's costs spiked due to big wage increases included in a five-year deal with the Teamsters union.
Management's decision to slash its shipping volumes for Amazon by more than 50% by the second half of 2026 also caused angst for many investors. Amazon generated 11.8% of UPS' total revenue in 2024.
More recently, the negative impact of President Trump's tariffs has hurt UPS' business. The average daily volume in the company's most profitable lane, China to the U.S., decreased by 34.8% in May and June 2025. UPS CEO Carol Tomé said in the company's 2025 second-quarter earnings call, "Trade follows policy, and generally, tariffs are not good for trade."
All these factors have contributed to worries about the sustainability of UPS' dividend. The company plans to spend $5.5 billion on dividend payouts in 2025, but generated free cash flow of only $742 million in the first half of the year.
Image source: Getty Images.
Looking on the bright side
There is some good news for UPS, though. For one thing, the higher costs in the company's deal with the Teamsters were heavily front-loaded. UPS has already felt the worst of the cost increases.
Reducing Amazon shipping volumes could also pay off handsomely. The business that UPS is dropping had low margins. Management is focusing on higher-margin opportunities, especially healthcare logistics. This should boost UPS' profits over the long run.
Tariffs admittedly create considerable uncertainty for UPS. However, the company is benefiting as trade increases between countries outside the U.S. as a response to the Trump administration's tariffs. For example, shipping volumes jumped 20% in Q2 from China to the rest of the world.
Meanwhile, UPS continues to cut costs. It's on track to deliver around $3.5 billion of cost reductions this year. It has implemented a voluntary driver separation program that could especially appeal to many of its more tenured drivers with higher salaries.
Also, management seems to be squarely behind the dividend program, with no hints of any forthcoming cuts. Tomé said in the Q2 call, "We know how important the dividend is to our investors, and you have our commitment to a stable and growing dividend."
Buy, sell, or hold UPS stock?
I don't think selling UPS stock is the best option right now. Several of UPS' headwinds could be only temporary. My hunch is that slashing Amazon shipping volumes will prove to be a smart move, in retrospect.
Of the 31 analysts surveyed by S&P Global in September, only three rated it as a "sell" or "underperform." The other 28 analysts were divided equally between those who recommended buying UPS and those who recommended holding the stock.
I think more risk-averse investors are probably better off holding for now. It remains to be seen how long UPS will take to turn things around.
On the other hand, the stock could be attractive for patient investors willing to take on some risk. UPS' forward price-to-earnings ratio is only 11.4. Its dividend yield is an ultra-high 7.7%. Just a little good news in the future could provide a huge catalyst for this beaten-down stock.
