Jim Cramer's Take on United Parcel Service (UPS) Stock
Recently, Jim Cramer discussed United Parcel Service, Inc. (UPS) on CNBC, cautioning investors against directly linking its performance to that of FedEx. This discussion was part of a broader analysis of logistics and courier companies following FedEx's recent earnings report.
Cramer's Concerns About UPS's Free Cash Flow
Cramer emphasized that while FedEx shares saw positive movement, UPS's financial situation, specifically its free cash flow, warrants careful consideration. He warned viewers about automatically assuming UPS would benefit similarly, highlighting a potential issue with dividend coverage.
Dividend Analysis and Potential Risks
Currently, United Parcel Service (UPS) pays a quarterly dividend of $1.64, translating to a 7.78% annual dividend yield. However, Cramer expressed concerns that the company's free cash flow might not be sufficient to sustain this dividend payout. He pointed out the discrepancy between the dividend payment and the company’s free cash flow.
“The market is, took up UPS with FedEx. I think it’s become very zero sum. They are very much like each other. FedEx deserves to be up 12, maybe 15. But UPS. Let’s remember, UPS, when it comes to the cash flow, I mean when you look at the free cash flow, they pay six fifty six, the dividend. The free cash flow doesn’t cover it. It’s five dollars and 27 cents. So I’m saying, if you think UPS should go up because of FedEx, you got it aaaaaalll wrong."
Alternative Investment Opportunities
While acknowledging the potential of UPS as an investment, the discussion also suggested exploring other opportunities, particularly in AI stocks. The article mentioned a belief that some AI stocks could offer higher returns with potentially limited downside risk. The reference pointed towards a free report about short-term AI stocks that may benefit from Trump tariffs and onshoring policies.
Further Reading
The article encourages readers to explore additional investment options, suggesting resources such as "30 Stocks That Should Double in 3 Years" and "11 Hidden AI Stocks to Buy Right Now."
