DKS vs. FIVE: Which Stock Should Value Investors Buy Now?
In a shareholder-friendly move, FedEx Corporation FDX announced a hike in its dividend payout. This, in turn, reflects the company’s intention to utilize free cash for enhancing shareholders’ returns.
Notably, the company raised its quarterly dividend by 30% to 65 cents a share (or $2.60 annually) from 50 cents (or $2 annually). The new dividend, which has been approved by the company’s board of directors, will be paid on Jul 9, 2018 to stockholders on record as of Jun 25. The dividend yield based on the new payout and the Jul 11 closing market price is approximately 0.99%.
Apart from highlighting FedEx’s commitment to create value for shareholders, this hiked dividend underscores its strong financial condition and bright prospects. Also, a look at the past records reveals this Memphis, TN-based company’s stable dividend payment history.
We remind investors that FedEx’s rival, United Parcel Service, Inc. UPS, had also raised its quarterly dividend by approximately 10% in February 2018. Following the hike, the company's quarterly dividend payout stands at 91 cents per share ($3.64 on an annualized basis).
As investors prefer an income generating stock, a high dividend paying one is much coveted. Needless to say, investors are always on the lookout for companies that have a track record of consistent and incremental dividend payments.
Shareholder-Friendly Announcement Precedes Q4 Release
The timing of the dividend hike announcement at FedEx is very appropriate and comes as the company is gearing up to unveil its fourth-quarter fiscal 2018 results on Jun 19.
We expect the company to deliver solid results in the fiscal fourth quarter driven by e-commerce growth. Also, FedEx’s Ground unit is expected to perform well backed by volume expansion and higher base rates. While releasing its fiscal third-quarter results in March, the company stated that it expects adjusted operating margin (minus TNT Express integration expenses) between 17% and 17.5% at its Ground unit.
Our quantitative model too shows that FedEx is likely to beat earnings in the fiscal fourth quarter because it has the perfect combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise..
Zacks ESP: FedEx has an Earnings ESP of +0.32% as the Most Accurate estimate exceeded the Zacks Consensus Estimate of $5.71 per share by 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: FedEx carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FedEx Stock Performing Well
In a year’s time, shares of FedEx have outperformed UPS as well as the industry it belongs to. While the stock has rallied 25%, UPS gained only 6.3% and the industry increased 16.5%.
The dividend hike is an added positive for the FedEx stock.
Other Stocks to Consider
Investors interested in the broader Transportation sector include Expeditors International of Washington, Inc. EXPD and Kirby Corporation KEX sporting a Zacks Rank #1.
Shares of Expeditors and Kirby have gained more than 37% and 28%, respectively, in a year’s time.
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Kirby Corporation (KEX) : Free Stock Analysis Report
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
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