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United Parcel Service shares have lost nearly two-thirds of their value since the start of 2022.
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The company's package delivery service is entrenched, hard to replace, and vital to the world.
United Parcel Service (NYSE: UPS), which usually just goes by UPS, has a huge dividend yield of 7.9%. Many investors are likely attracted to it as a dividend stock, but that's a risky call. It is more appropriate to see this package delivery giant as a turnaround stock. And if that's how you view it, now could be the time to hit the buy button.
Without getting into the logistical details, moving packages quickly and cost-effectively is very difficult. Even after huge capital investments in its own delivery service, Amazon still uses UPS. But Wall Street has a habit of going to extremes, which is a big part of why UPS could be an attractive turnaround stock.
During the pandemic, package demand spiked. Investors extrapolated that demand far into the future, bidding up UPS' stock price. Demand slowed, and UPS' stock price crumbled when the world learned to live with COVID-19. UPS chose to start a major business overhaul as demand was returning to normal levels. The goal is to increase the use of technology to cut costs and to refocus on the company's most profitable business lines to increase profit margins.
This is a multiyear effort with material up-front costs. And exiting low-margin business will lower sales even as it helps improve profitability. (Notably, UPS has chosen to proactively reduce its business relationship with Amazon.) Financial results have been ugly lately, which is what you'd expect. An over 97% dividend payout ratio, however, hints that most income investors should tread with caution.
However, there are positives starting to show through. For example, revenue per piece increased 5.5% in the U.S. business during the second quarter of 2025. That could be signaling that deeply out of favor UPS stock is turning a corner and is, thus, ripe for an upturn as investors get more confident in its business overhaul.
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