Is United Parcel Service Stock a Buy Despite Tariff Worries?

Source The Motley Fool

At its current share price, United Parcel Service's (NYSE: UPS) dividend offers investors a huge 6.4% yield. That payout is backed by 16 straight annual dividend increases, so given that the S&P 500 (SNPINDEX: ^GSPC) index is only offering a measly 1.3% yield, income-seeking investors should be doing a deep dive on UPS today. But is the logistics giant's stock worth buying as international trade faces the threat of tariff-driven upheavals?

What goes up comes back down

Business situations, and emotions, change quickly on Wall Street. Beginning in 2020, the coronavirus pandemic led investors to drive UPS stock sharply higher. The thesis seemed to be that COVID would keep people stuck in their homes forever and, thus, they would have to buy more things over the internet. That, in turn, would result in massive growth for package delivery companies like UPS.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

UPS Chart
UPS data by YCharts.

As it turned out, thanks to historically rapid and impressive vaccine development, the coronavirus was, if not beaten, reduced from a pandemic-level health crisis to an endemic issue that the world has largely learned to live with. As the threat receded, people started to venture out into the real world again and the optimism about UPS' prospects turned sour. The stock plunged and management started to retrench. This hasn't been a minor headwind for the stock: It has lost more than half of its value from the peak it hit in early 2022.

The business overhaul of UPS has been material. It has been closing facilities, modernizing the facilities it is keeping, and working with its union to iron out a new labor deal. The big goal is to boost profitability, and management has had some success on that front. The company's profit margin, which is down by about 50% from its high, appears to have hit an inflection point in the middle of 2024.

A delivery person holding a large pile of boxes that obscures their face.

Image source: Getty Images.

Tariff troubles and self-inflicted "wounds"

The thing is, when UPS' profit margin stabilized, management made a bold decision to keep going on the revamp. Instead of just coasting on the good news, it announced that it was going to materially curtail its relationship with its largest customer, Amazon.com. The logic was pretty simple: The business UPS does with Amazon isn't very profitable. And the e-commerce giant has been working to expand its own distribution network, so that low-margin business was likely to dwindle over time, anyway.

Investors didn't appreciate the decision, but it was made from a position of strength. It is likely that it will prove to have been the right long-term call, even if it means some additional near-term pain.

However, the current White House administration's fluctuating tariff policies have created uncertainty in global trade relationships. Cautious investors have continued to dump UPS' shares, which are down by nearly 20% so far in 2025.

That sell-off seems reasonable if you believe that global trade will never fully recover from President Trump's trade war. However, that doesn't seem like the most likely outcome, given the interconnectedness of the modern world. It seems more likely that rhetoric will be intense, but that in the end, cooler heads will prevail. The recent movement between the United States and China on trade talks offers an example of how that could play out. All in, it is likely that investors are overly negative on UPS's prospects now after having been overly positive about them during the pandemic.

UPS is still operating from a position of strength

UPS has plenty of work ahead of it as it continues to streamline its business. That will notably include trying to adjust to handling materially less package volume thanks to its shift away from Amazon deliveries. Execution will remain an important thing to monitor.

Nevertheless, experienced dividend investors would understand that the company appears to have stabilized its core. That means that it is facing both the tariff-related headwinds and the self-imposed Amazon-related headwinds from a position of strength. Its bottom line is still being impacted by the costs of revamping the business, so earnings may not be the most meaningful metric to track right now. But it is worth highlighting that first-quarter 2025 revenues and operating profits were up year over year. In other words, UPS still appears to be executing well despite everything it faces. That should make it an interesting investment option for those who are willing to venture into turnaround situations.

Should you invest $1,000 in United Parcel Service right now?

Before you buy stock in United Parcel Service, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and United Parcel Service wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,879!*

Now, it’s worth noting Stock Advisor’s total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Japan’s tough stance on US tariffs threatens to stall trade dealJapan's strong opposition to US tariffs could hinder the trade agreement from making progress.
Author  Cryptopolitan
May 16, Fri
Japan's strong opposition to US tariffs could hinder the trade agreement from making progress.
placeholder
Pound Sterling advances against US Dollar on soft US PPI, Retail Sales dataThe Pound Sterling (GBP) rises further to near 1.3330 against the US Dollar (USD) in Friday’s European session, extending Thursday’s upside move.
Author  FXStreet
May 16, Fri
The Pound Sterling (GBP) rises further to near 1.3330 against the US Dollar (USD) in Friday’s European session, extending Thursday’s upside move.
placeholder
UnitedHealth's share price halved in half a year, and its deep trouble triggered a market sell-off.​UnitedHealth Group (UNH), the largest health insurance company in the United States, suffered a sharp market sell-off, plunging 19% intraday on May 15 and finally closing down 10.93%.
Author  TradingKey
May 16, Fri
​UnitedHealth Group (UNH), the largest health insurance company in the United States, suffered a sharp market sell-off, plunging 19% intraday on May 15 and finally closing down 10.93%.
placeholder
Alibaba's Stock Price Drops, As Q4 Revenue Fell Short of Expectations Amid AI Growth Concerns​Alibaba (HK: 9988) experienced a significant drop on Friday, falling 5.4% during the Hong Kong trading session, with shares hitting a low of HK$120.30.
Author  TradingKey
May 16, Fri
​Alibaba (HK: 9988) experienced a significant drop on Friday, falling 5.4% during the Hong Kong trading session, with shares hitting a low of HK$120.30.
placeholder
Gold edges lower amid geopolitical, trade uncertaintyGold (XAU/USD) price edges lower and struggles to hold near the $3,200 level at the time of writing on Friday as multiple questions and concerns arise in markets and amongst traders.
Author  FXStreet
May 16, Fri
Gold (XAU/USD) price edges lower and struggles to hold near the $3,200 level at the time of writing on Friday as multiple questions and concerns arise in markets and amongst traders.
goTop
quote