The Motley Fool: Delivering dividends amid uncertainty

Shares of United Parcel Service (NYSE: UPS) were recently hovering around a five-year low – and sporting a hefty dividend yield of 6.7%. All is not peachy at UPS, though, as its earnings are close to no longer covering those dividend payouts.

First-quarter 2025 results generally compared poorly to year-earlier levels, disappointing investors. Management has reassured shareholders that the dividend is safe, but UPS wants earnings to be double the dividend. To achieve that, it must either grow earnings faster than the dividend or cut the payout.

UPS could still be worth buying for patient investors. Unlike some turnaround companies that are losing market share and not making a profit, UPS is incredibly profitable. Its poor results stem from overexpansion to prepare for a sustained boom in delivery volumes. Instead, volumes flatlined as the pandemic receded, leaving UPS overextended.

UPS’s profits are still slightly above pre-pandemic levels; they look low because of how much they grew in 2020 and 2021. Even if UPS slashes its dividend in half, it would yield more than 3.3% at recent share prices – with the payout likely growing over time.

All told, UPS stands out as a good choice for investors looking for a beaten-down value stock to hold for years. (The Motley Fool recommends UPS.)

My Smartest Investment

My smartest financial move has been to drive slightly new, paid-off cars. – J.B., online

The Fool Responds: There are upsides and downsides to buying a used car, but in general, it’s a savvy financial move. There are some downsides: You often won’t get a warranty, you may not get the latest safety features, you can’t customize many options, the vehicle will have experienced some wear and tear, and you may not know its full history.

On the other hand, cars can lose 10% or more of their value each year, and new cars lose some value as soon as you drive them off the lot. Some used cars do come with warranties, and used cars cost less to buy – and typically less to insure. That means you can pay them off sooner, as well. Currently, with tariffs potentially making new cars more expensive, used cars can look even more attractive.

It’s smart to do your research before buying a used (or new) car, at sites like ConsumerReports.org, Edmunds.com, KBB.com and CarEdge.com. You might look into buying a used vehicle via a local seller or via sites such as Cars.com, Carvana.com, and CarMax.com.

Ask the Fool

Q: I read that Warren Buffett is stepping down from his company, Berkshire Hathaway. Is it time to sell its stock? – R.R., Cadillac, Michigan

A: It’s true that Buffett, along with his late business partner, Charlie Munger, was the driving force behind the company’s growth for 60 years. It’s also true that Berkshire isn’t likely to grow as fast now as it once did, when it was much smaller. But Buffett built his company to last and has thoughtfully chosen Berkshire veteran Greg Abel to succeed him.

When legendary leaders pass the torch, selling isn’t necessarily a smart move. Consider that Costco cofounder Jim Sinegal stepped down in 2012, but the stock has averaged annual gains of 22% over the past decade. Similarly, Apple cofounder Steve Jobs stepped down in 2011, yet Apple’s stock has averaged annual gains of 20% over the past 10 years.

Here are some (among many) good reasons to sell a stock: You’ve lost faith in management, you don’t expect the company to grow sufficiently in the years to come, you need the money from the sale, or you’ve found a much better investment.

Q: What’s the “attention economy”? – D.N., Fort Myers, Florida

A: With billions of people regularly visiting various sites online, the race is on to “monetize” them – that is, to find ways to profit from those visits. A key way to do so is via online advertising, and many companies are making billions of dollars that way. For example, Meta Platforms – parent of Facebook, Instagram, WhatsApp and Threads – raked in $160.6 billion in 2024 just from advertisements. In 2024, Google parent Alphabet generated $264.6 billion in advertising revenue – $36.1 billion from its YouTube business alone.