UPS Stock Is Sinking But This Dividend Giant May Be Poised for a Comeback

United Parcel Service may be a household name, but lately, its stock performance has left investors anything but comforted.

UPS started 2025 on the back foot. In the first quarter, revenue slipped slightly, margins were underwhelming, and earnings per share were up just 4% year-over-year. What’s more telling? U.S. daily delivery volumes were down by around the same amount.

That’s a red flag because volume drives leverage in the logistics business. When trucks run less full, the math gets ugly. UPS briefly reignited optimism late last year with a bump in volume and profitability, but the latest numbers suggest that bounce was more blip than trend.

Key Points

• Falling delivery volumes and thin margins have dragged down UPS stock, which tends to move in lockstep with operating margin.

• UPS is shifting from volume to profitability, betting big on high-margin sectors like healthcare.

• The 6.8% yield looks tempting, but a 92% payout ratio raises flags. 

Where UPS Went Off Course

Many don’t realize that UPS stock tends to move in lockstep with its operating margin. The last time margins were strong 3 years ago the stock was flying high. Since then, both metrics have deflated like a collapsing balloon and highlight how razor-thin the buffer is between great performance and real struggle.

Another often overlooked fact is UPS once held a massive edge in express delivery, but competition from FedEx, Amazon’s in-house logistics network, and even regional upstarts has eaten away at its pricing power.

Now, with margins and volume under pressure, investors are rightly asking whether UPS pivot fast enough?

A Bold but Risky Shift

In March of last year, UPS unveiled its “Better and Bolder” approach. The pivot? Less focus on volume, more focus on profitability. The new emphasis is on premium services like healthcare logistics that command better margins.

The twist is healthcare is expected to become a $5 trillion global industry by 2030, and logistics plays a crucial behind-the-scenes role.

UPS’s decision to double down here may be prescient because it already operates one of the world’s largest cold-chain logistics networks, a capability few investors appreciate.

Yet this shift comes at a cost. Sacrificing low-margin volume, especially from mega-clients like Amazon, means near-term revenue may take a hit.

Dividend Looks Juicy But Is It Sustainable?

That 6.84% dividend yield might tempt income investors, but there’s more going on behind the scenes with the payout ratio creeping up to 92%.

Many investors don’t realize that UPS aggressively paid down debt during the 2021–2022 boom, but it’s now backpedaling.

Some believe a dividend cut is inevitable yet ironically, even if the company slashed the payout in half, the stock would still be in the top quartile of dividend payers in the S&P 500.

Is the Worst Priced In?

Despite the doom and gloom, there are reasons for optimism. UPS is taking the long road by investing in automation, high-margin verticals, and modernizing its network. Management didn’t panic and chase short-term gains.

Valuation-wise, the stock trades at just 13.9x trailing earnings below the 15x line in the sand Warren Buffett is believed to favor. When great companies fall out of favor, history shows that even a whiff of stabilization can ignite strong returns.

Another under-the-radar angle is that UPS owns one of the largest private alternative fuel fleets in the country, including more than 13,000 vehicles running on natural gas, electric, or hybrid systems.

So, What’s The Big Picture?

UPS isn’t delivering on all cylinders but that might be the opportunity. For long-term investors, the real value lies not in the current dividend but in the company’s transformation. If it pulls off the shift toward higher-margin business, trims costs, and regains earnings momentum, today’s price could look like a steal.