United Parcel Service (UPS 2.93%) delivers around 20.8 million packages every day. But it hasn't been delivering for investors in recent years. Despite a bounce that began a few months ago, UPS' share price remains down roughly 37% since early 2023.
Some might view UPS as the kind of stock to not touch with a 10-foot pole. Not me. Here's why I just loaded up on this 5.7%-yielding dividend stock.
Image source: UPS.
1. The comeback is commencing
I've been expecting UPS to mount a strong comeback for a while now. It looks like that comeback is commencing.
Over the last three months, UPS stock is up more than 24%. Its performance has absolutely trounced that of the S&P 500 (^GSPC 1.52%) and topped the broader industrials sector.
NYSE: UPS
Key Data Points
What happened? UPS blew past Wall Street's earnings estimates for the third quarter of 2025. The company also handily beat expectations for the fourth quarter.
Impressively, UPS managed to outperform despite significant challenges. CEO Carol Tomé acknowledged those challenges in the Q4 earnings call, stating, "In 2025, we operated through a very dynamic macro environment, including significant changes in global trade policies and increasing geopolitical concerns."
To be sure, UPS still faces some headwinds. The company isn't likely to generate the kinds of numbers investors prefer in the first half of 2026. However, management expects significant improvement in the second half of the year. It also believes that UPS will be poised for greater growth beyond 2026.
2. Higher profitability lies ahead
I'm confident that UPS's profitability will improve. And share prices tend to track with earnings over the long term.
Why am I so optimistic? For one thing, UPS has already dramatically reduced its cost structure. The company has achieved roughly $3.5 billion in cost savings from network reconfiguration alone.
Looking ahead, UPS is in the home stretch of the Amazon (AMZN 1.52%) volume glide down. The company expects to move forward with a second voluntary separation program for its full-time drivers, following a successful one offered last year. It's targeting additional savings of around $3 billion in 2026 related to the Amazon glidedown.
Also, UPS is working hard to secure higher-margin business. Perhaps the best example of this initiative is the company's efforts to become the world's No. 1 provider of complex healthcare logistics. The November 2025 acquisition of Andleur Healthcare Group for $1.6 billion represented a big step toward achieving that goal.
UPS is also seeking to increase its volumes in other, more profitable markets, notably small- to medium-sized businesses (SMBs) and business-to-business (B2B) customers. The company increased its SMB penetration in 2025 to 31.8% of total U.S. volume, a good sign of progress. It also increased B2B to 42.3% of total U.S. volume, a 250-basis-point increase from the previous year.
3. The dividend is juicy and reliable
Yes, UPS' dividend is another key reason why I recently bought more shares. Admittedly, the dividend appeared somewhat shaky in recent years. UPS generated less free cash flow than it spent on funding the dividend program.
However, that's changing. The company expects to pay $5.4 billion in dividends in 2026. It's targeting free cash flow of around $6.5 billion (including the annual pension contribution of $1.3 billion, but before factoring in the impact of the planned voluntary driver separation program)
A dividend yield in the ballpark of 6% makes it much more likely the stock will deliver a double-digit total return. And when the day comes when I want to use dividends for income rather than reinvesting, I think UPS' dividend will be one that I can count on.
