FedEx Dividend Hike Not Enough, Trumped By Fleet Retirement Update

Transportation

Published: June 4, 2012 4:39 pm

Last Updated: April 27, 2020 9:16 pm

FedEx Corporation (NYSE: FDX) has announced two initiatives and the more important issue to long-term shareholders was almost lost in the shuffle. The first initiative is a plane retirement announcement, but the better news is a long-expected dividend hike.

The FedEx Board of Directors declared a one-penny hike to its quarterly cash dividend and the new rate will be $0.14 per share per quarter versus the prior $0.13 level; it is payable July 2, 2012 to stockholders of record at the close of business on June 18, 2012.

The company will permanently retire 18 Airbus A310-200 aircraft and 26 related engines, as well as six Boeing MD10-10 aircraft and 17 related engines. The bulk of these are currently parked and not in revenue service. FedEx will take a non-cash impairment charge of $134 million.

What may be an ongoing debate is that shareholders probably want more here in the payout front. There is an international consolidation that has been taking place, and the company competes head to head against United Parcel Service, Inc. (NYSE: UPS). The difference is that UPS pays its shareholders a dividend of over 3% now versus only 0.65% in FedEx shares.

This higher dividend has a long way to go before investors will get too excited here.

JON C. OGG

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