4 Reasons I'm Keeping My Eye on UPS Stock Right Now

Key Points

• UPS' ultrahigh-yield dividend remains a top draw for income investors.

• The impact of tariffs and the tapering of Amazon shipment volumes are key things to monitor with UPS.

• However, the company's expansion into higher-profit opportunities could boost growth over the long term.

• 10 stocks we like better than United Parcel Service ›

Like many investors, I keep tabs on quite a few stocks. Some of them are big winners, while others aren't. United Parcel Service (NYSE: UPS) falls squarely into the latter category.

Shares of the package delivery giant have plunged more than 30% year to date, with the sell-off intensifying after the company's second-quarter update last week. Here are four reasons I'm still keeping my eye on UPS stock right now.

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1. The dividend

I'd be lying if I said the dividend wasn't the primary thing about UPS that's capturing my attention. The stock's forward dividend yield now stands at 7.57%. Such a juicy yield is hard to ignore.

The obvious question, though, is whether or not UPS' dividend is sustainable. CEO Carol Tomé thinks it is. In the Q2 earnings call, she said: "UPS is rock-solid strong, and so is our dividend. The UPS dividend is backed by solid free cash flow and a strong investment-grade balance sheet."

Perhaps the most striking thing Tomé said, though, was that management understands "how important the dividend is to our investors." She added, "[Y]ou have our commitment to a stable and growing dividend."

2. Tariff impact

The economy has yet to feel the full brunt of the Trump administration's tariffs. However, UPS is already experiencing some tariff-related pain. Tomé expressed her opinion on tariffs bluntly in the Q2 call, stating, "Trade follows policy, and generally, tariffs are not good for trade."

I'm watching to see how UPS adapts to the new normal of high tariffs. The company is already dancing to some extent. For example, its most profitable trade lane is between China and the U.S. The average daily volume for this trade lane fell by 34.8% year over year in May and June. But UPS' volume from China to the rest of the world jumped 22.4% in Q2. The company also almost doubled its capacity in the India-to-Europe trade lane to meet growing demand.

3. Amazon glide-down

Some might view UPS' decision to slash its business with Amazon by 50% as crazy. I suspect the move might instead be crazy like a fox. Why? I expect UPS to emerge as a more profitable business.

The main hitch in the Amazon glide-down so far is that UPS' staffing attrition rate hasn't been as high as anticipated. However, the company initiated a voluntary separation program for its full-time U.S. drivers. As drivers (and especially the higher-paid ones) begin to leave at the end of this month, UPS should start seeing significant cost reductions.

Amazon will still be a key customer for UPS when the transition is completed. But the Amazon volumes that UPS is keeping generate higher profits than the volumes it's eliminating.

4. Expanding into higher-profit opportunities

On a similar note, I'm also monitoring UPS' progress in expanding into other higher-profit opportunities. Healthcare logistics stands at the top of the list, with an $82 billion total addressable market. The good news on this front is that UPS is making strides toward its goal of becoming the world's top complex healthcare logistics provider.

The company already leads the global market in radiopharmaceutical logistics. UPS offers some capabilities that rivals in the healthcare logistics market don't, including RFID tagging its packages. In addition to organic growth in complex healthcare logistics, the company also hopes to close on its acquisition of Andlauer Healthcare Group before the end of 2025. Andlauer will beef up UPS' cold chain and pharmaceutical transportation capabilities in the U.S. and Canada.

Serving small-to-medium-sized businesses (SMBs) is another great growth market for UPS. And it's already an important segment for the company, with SMBs making up 32% of total U.S. volume in the second quarter of 2025.

Is UPS stock a buy?

Growth investors probably won't find UPS very attractive. However, I think income investors should love the stock with its ultra-high dividend yield. UPS could also appeal to value investors, with its shares trading at only 13.2 times forward earnings.

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Keith Speights has positions in Amazon and United Parcel Service. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.