The $0.40 dividend announced by the FedEx Corp. board of directors could be a signal of the company’s transition from a growth stock to a yield stock, according to a report from investor news service Seeking Alpha.
The board of directors of FedEx Corp. earlier this week declared a quarterly dividend of $0.40 per share of FedEx common stock, the parcel carrier said in a statement.
The dividend, payable July 1 to shareholders of record at the close of business on June 16, 2016, represents a 60 percent premium from the previous quarterly dividend of $0.25.
The sharp increase could be a signal that FedEx is transitioning from a growth stock to a yield stock, according to a report from investor news service Seeking Alpha.
“For most of the last decade FedEx (NYSE:FDX) has paid back its shareholders with capital gains. Since the bottom of the Great Recession, in early 2009, the shares are up 370%,” said SA analyst Dana Blankenhorn. “But since early 2015, as the stock has run out of running room (and it is down about 10% from those levels) management has changed course.
“Slowly, FedEx is becoming a yield stock.”
Blankenhorn said this is not quite the case yet, despite the company’s quarterly dividends doubling since early 2015. He noted FedEx stock performance has been “dramatically weaker” over the last year than that of parcel archrival UPS, down 10 percent during that time compared with a 3 percent increase in UPS share value.
Shares are up 10.6 percent since the start of the year, however, from a closing price of $148.99 per share on Dec 31, 2015 to $164.75 per share at close of business yesterday.
“UPS was helped by the annual seasonal bump of Christmas, during which its revenue was up 10% from normal, but the numbers are now back in line with last year,” he said. “Margins are fatter at UPS, but those at FDX are now expected to catch up, if the analysts are right on the earnings.
“There is no guarantee that FDX will continue to raise its dividend, but UPS has already undergone the transition from growth to yield, and its 78 cent/share dividend now yields 3%. If FDX follows suit over the next few years, continuing to increase the dividend in a sustainable way, you should get a pop in both directions, on the stock price and in what you’re being paid to own it.”
FedEx Corp. late last month completed its 4.4 billion euro (U.S. $4.9 billion) acquisition of the Netherlands-based global express carrier TNT Express, first announced in April 2015, greatly expanding the company’s footprint in Europe.
FedEx quarterly dividend jumps 60%
