FedEx Corporation (NYSE:FDX) is a $35 billion company. Despite its massive size, dividends are not FedEx's forte. With a 0.8% yield, there are investment options out there with much better dividends. Here are three of them.
CH Robinson Worldwide
Despite the fact that CH Robinson Worldwide (NASDAQ:CHRW) recently celebrated its 110th birthday, this $9 billion Fortune 500 third-party logistics company has nowhere near the street cred as FedEx Corporation and United Parcel Services (NYSE:UPS).
That's because CH Robinson Worldwide is a class "B2B" (business to business) corporation, providing other companies with the logistics solutions they need to get their goods from Point A to Point B. Its 11,500 employees serve 46,000 customers across four continents, pulling in $13.5 billion in fiscal 2014 sales. It boasts North America's largest motor carrier capacity, and works through more than 66,000 transportation contractors.
With a current 2.5% dividend yield, CH Robinson Worldwide has steadily increased distributions over the past five years to keep its payouts in the 2% range. However, that same period has seen CH Robinson Worldwide's stock slump 19% while the S&P 500 (INDEX ^GSPC) has soared 45%. While CH Robinson boasts that it's distributed regular dividends for more than 25 years, its antics haven't convinced all investors it's the best place for their money. Its dividend is decidedly better than FedEx's, but its overall offerings might not be. The freight business has hit its fair share of road bumps over the past few years, and investors will want to keep a close eye on CH Robinson if they choose to stock up on this dividend stock.
One step back from logistics companies lie the corporations that keep their engines running—literally. Cummins (NYSE:CMI) is a $15 billion engine maker, specializing in the sorts of natural gas and diesel truck engines that logistics companies need.
Its 600 distributors with 7,200 dealer locations give this Indiana-based corporation access to over 190 countries and territories, and its business expand beyond trucks to encompass other vehicles, power generators, and components for other fuel, exhaust, and engine systems.
Recently, that far-stretching model has gotten Cummins into trouble. While cheap energy has been a boon to transportation, in general, the global energy sector (and especially China and Brazil markets) has hit tough times. Part of the reason Cummins can currently offer investors a 4.1% yield is because its stock price has declined 40% in the past year .
As fellow Fool Travis Hoium points out, Cummins is cutting costs to account for shrinking business segments. Given the strength of the U.S. economy and the fact that 60% of the Cummins' sales still come from North America, the company will most likely use its sizable cash pile to increase its distributions again in 2016. For dividend stock investors looking for reliable payouts, Cummins may be the back-end business that delivers better dividends than FedEx Corporation.
United Parcel Service
It's not just United Parcel Service's business that is bigger than FedEx Corporation—UPS's dividend is, too. With a current 3.2% yield, UPS is focusing more on dividends and less on growth than FedEx Corporation. It currently enjoys around $10 billion more in sales and uses around two-thirds of its earnings to distribute dividends. FedEx allocates just 30% of its own earnings toward distributions, choosing instead to use the rest on strategic acquisitions and other internal investments.
United Parcel Services will face its own uphill battles as the logistics and delivery business becomes more competitive, but the company should continue to deliver on its distributions. For dividend stock investors, United Parcel Service simply offers more than FedEx feels it should.
Delivering on Dividends
Dividends are important—but they're ultimately just one way that corporations return value to shareholders. CH Robinson Worldwide, Cummins, and United Parcel Service all offer better dividends than FedEx. But for long-term investors, building out a company's competitive advantage and a steady focus on growth can be equally essential. Pick your dividend stocks carefully, and never forget to look beyond quarterly distribution bragging rights.