Dividends are a way of rewarding investors for holding on to a company’s stock over time. As the share price increases, it would only make sense for the dividend to increase as well. Recently FedEx bumped up its dividend, but was it enough?
Back on June 9, the board of directors declared a quarterly cash dividend of $0.25 per share. That translates to an annualized dividend of $1.00, an increase of 25% from the previous level of $0.80 annually.
Overall this increase in the dividend works out to a yield of 0.56%, compared to current prices. The payout ratio is also 11.2% compared to current earnings estimates. The consensus estimates from Thomson Reuters are $8.94 in EPS and $47.66 billion in revenue for the full year.
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FedEx’s direct competition, United Parcel Service Inc. (NYSE: UPS), has a much higher annualized dividend at $2.92. The dividend yield for UPS is also higher at 2.9%. It has a payout ratio of roughly 56%, compared to the current full year consensus estimate for EPS of $5.19.
24/7 Wall St. predicted the move by FedEx prior to the announcement, along with a few other dividend hikes we expect this summer.
A few analysts weighed in on FedEx prior to its earnings release:
- Deutsche Bank has a Buy rating and increased its price target to $216 from $209.
- Cowen reiterated an Outperform rating with a price target of $210.
- Citigroup has a Buy rating with a $205 price target.
- Credit Suisse has an Outperform rating and increased its price target to $206 from $198.
Shares of FedEx were down 0.4% at $181.71 on Tuesday afternoon. The stock has a consensus analyst price target of $194.21 and a 52-week trading range of $138.30 to $185.19.
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