Key Points
United Parcel Service is near the end of a material corporate overhaul.
The company is leaner and focused on its most profitable customers.
United Parcel Service(NYSE: UPS) believes that its financial results will turn higher in the second half of 2026. One key reason for this is that its efforts to reposition its business are coming to an end. And finally, the benefits of its investment in the future will begin to show. Buying now, while the stock is still unloved on Wall Street, could help set you up for a lifetime of income.
United Parcel Services is going to support its dividend
The industrial company's 2026 guidance includes $5.4 billion in dividends. That's the same amount as the company paid out in 2025. In other words, management believes it can continue to support the stock's lofty 6.1% dividend yield.
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In fairness, the company expects its financial performance in 2026 to be roughly flat with 2025. However, management is breaking the year into two halves. The first half is likely to see continued weak performance, while the second half will see performance turn higher. The mid-year inflection point will mark a key transition.
UPS is prepared for a brighter future
UPS' package delivery business is essential, since physical things still need to be moved around the world. The company is an expert at doing this, and it would be hard to replace the infrastructure it has in place. That said, the world continues to change, and UPS has to change with it. That is what it has been doing for the past few years, despite the large up-front costs involved.
At this point, the company's business has been streamlined. It has cut staff, increased its use of technology, and sold off assets it no longer needs because of its increased efficiency. This, however, was just one of the lingering issues that management took on during the turnaround. The other was to shift away from high-volume customers, like Amazon(NASDAQ: AMZN), that offered only low-margin business. That hurts the top line even as it improves the company's overall profitability. At the same time, UPS has been working to increase its exposure to customers that offer higher profit margins, such as those in the healthcare sector.
Wall Street still isn't convinced
When you put it all together, UPS has upgraded its business so it can compete more effectively in the future than it has in the recent past. And buying it now, before the second half of 2026, gets you in the door while Wall Street is still focused on the company's weak recent performance. Notably, the stock remains 50% below its 2022 high. And you can collect a large dividend, which management says it is willing to support, while you wait for investors to catch up to the fact that UPS is about to cross the finish line of its transformation effort.
Should you buy stock in United Parcel Service right now?
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.
