Is United Parcel Service, Inc. (UPS) a Low PE High Dividend Stock to Buy Now?

United Parcel Service, Inc. (UPS) is a well-established logistics and delivery company with a strong track record of dividend growth and a low price-to-earnings (PE) ratio. As of February 17, 2025, UPS has an annual dividend yield of 5.64% and a PE ratio of 17.22, making it an attractive option for income-oriented investors seeking a combination of capital appreciation and dividend income.

UPS's dividend history is marked by consistent growth, with an average annual increase of 9.6% over the past five years. The company's commitment to returning capital to shareholders through dividends is evident in its high payout ratio of 98.94%, which indicates that a significant portion of UPS's earnings is distributed as dividends. This dividend growth strategy has contributed to UPS's strong performance and has attracted investors seeking stable, long-term income.

UPS's low PE ratio suggests that the company's stock is undervalued relative to its earnings potential. This valuation metric is calculated by dividing the company's stock price by its earnings per share (EPS). A lower PE ratio indicates that the stock is relatively inexpensive compared to its earnings, making it an attractive option for value-oriented investors.

To further evaluate UPS as a potential investment, it is essential to consider the company's fundamentals, such as its revenue growth, operating margin improvement, and strategic acquisitions. UPS has experienced steady revenue growth over the past five years, with a compound annual growth rate (CAGR) of approximately 3.5%. This growth is driven by increased package volume and pricing strategies, which align with UPS's focus on expanding its global network and improving operational efficiency.

UPS has also made significant strides in improving its operating margin, which has increased from 9.8% in 2019 to 11.6% in 2024. This improvement is a result of cost-cutting measures, network optimization, and strategic acquisitions, all of which support UPS's long-term goal of enhancing shareholder value.

In addition to its strong fundamentals, UPS has a history of strategic acquisitions and partnerships that have expanded its service offerings and entered new markets. For example, the acquisition of Coyote Logistics in 2015 and the partnership with CVS Health in 2021 have allowed UPS to diversify its revenue streams and tap into new growth opportunities.

UPS's commitment to sustainability and environmental initiatives is another factor that sets it apart from its competitors. The company has made significant investments in electric vehicle (EV) adoption and renewable energy projects, which not only help UPS reduce its carbon footprint but also position the company as a leader in sustainable logistics.

In conclusion, UPS's low PE ratio, strong dividend history, and solid fundamentals make it an attractive option for income-oriented investors seeking a combination of capital appreciation and dividend income. The company's commitment to sustainability, strategic acquisitions, and operational efficiency further enhance its long-term prospects. However, investors should also be aware of the risks and challenges facing UPS, such as volatility in shipping volumes, competition, regulatory and compliance risks, technological disruption, labor relations, and sustainability and environmental concerns. By carefully evaluating these factors, investors can make an informed decision about whether UPS is the right fit for their portfolios.