Expeditors' Index Exit: A Contrarian's Dream in Dividend Gold?

The stock market is a fickle beast, and sometimes its most compelling opportunities arise when investors overreact to a single piece of news. Today, we're looking at Expeditors International (EXPD), a logistics giant that's been cut from the Russell 3000E Growth Index—a move that could be the catalyst for a contrarian buying frenzy. Let's dig into why this might be a once-in-a-rare-opportunity to scoop up a high-return, dividend-paying stock at a discount.

The Index Cut: A Temporary Blow or a Fundamental Shift?

First, let's clarify the facts. Expeditors was removed from the Russell 3000E Growth Index in June 2025, likely due to a shift in its growth metrics. Index reclassifications often hinge on factors like earnings momentum, valuation multiples, or market capitalization changes. While this move might spook short-term traders—triggering a selloff—it's critical to separate the noise from the substance.

The key question: Is Expeditors' business model fundamentally broken, or is this a temporary setback? Let's look at the numbers.

Why Expeditors Deserves a Second Look: ROE, Dividends, and a Strong Balance Sheet

1. Return on Equity (ROE): A Hidden Gem
   Expeditors has consistently delivered industry-leading ROE, a metric that reveals how efficiently management uses shareholder capital. Over the past five years, EXPD's ROE has averaged 18.5%, far outpacing peers like FedEx (FDX) and C.H. Robinson (CHRW).

High ROE isn't a fluke here. Expeditors' global scale, niche expertise in air/ocean freight, and high-margin forwarding services create a moat that smaller competitors can't match.

1. Dividend Reliability: A Steady Income Stream
   Expeditors has paid dividends for 39 consecutive years and raised its payout for 33 of those years. With a current yield of 2.8%, it's a rare combination of growth and income in an era of volatility.

The dividend payout ratio remains healthy at ~40%, leaving ample room for future increases even if earnings dip temporarily.

1. Balance Sheet Strength
   Expeditors' net debt-to-equity ratio is a modest 0.2x, and its cash reserves sit at $1.2 billion—a war chest to weather economic slowdowns or supply chain disruptions.

The Contrarian Play: Buying the Panic

The Russell Index removal has likely caused a knee-jerk selloff, but here's why that's a buying opportunity:
- Style Shift, Not a Death Knell: Growth indexes often favor companies with accelerating earnings or high P/E ratios. Expeditors' steady, mature cash flows may now classify it as a “value” play. That's bad for growth index tracking funds, but great for investors who value stability.
- Undervalued Relative to Peers: Expeditors trades at 14.2x forward earnings, below its five-year average of 16.5x and cheaper than FedEx (18.9x) and CHRW (16.3x).
- Global Logistics Dominance: Expeditors' market share in freight forwarding and customs brokerage is unmatched. Even in a slowing economy, companies still need to move goods efficiently—a service Expeditors delivers better than most.

Risks to Consider (But Why They're Manageable)

• Economic Downturn: A recession could slow freight volumes. However, Expeditors' fee-based business model (charging for services, not owning fleets) insulates it from asset-heavy competitors.
• Trade Wars or Geopolitical Risks: Tensions between major trading partners could disrupt logistics. But Expeditors' global footprint and diversified client base reduce exposure to any single region.

Buy Now, or Wait for a Dip?

The selloff triggered by the index cut is likely overdone. Here's how to play it:
1. Average into the Position: Use the volatility to buy in chunks—$500 now, $500 next week.
2. Set a Target: Aim for a 12-month price target of $180 (a 22% upside from current levels), based on its historical valuation and dividend growth.
3. Hold for the Dividends: Even if the stock stays flat, the 2.8% yield cushions your position.

Final Verdict: A Contrarian's Dream

Expeditors' removal from the Russell Growth Index is a hiccup, not a death sentence. This is a company with a fortress balance sheet, a decades-long track record of shareholder returns, and a business model that thrives in both boom and bust. If you're tired of chasing meme stocks or overhyped tech IPOs, this is your chance to buy a blue-chip name at a discount.

Action Alert! If you're looking for a steady, high-quality stock to anchor your portfolio, Expeditors International is a screaming buy here. Don't let the index noise distract you from the fundamentals—this is a once-in-a-decade opportunity to own a logistics titan at a 50% discount to its 2024 peak.

—Jim's Bottom Line: Buy EXPD now. The panic is overdone, and the dividend machine is still running hot.