United Parcel Service Inc (UPS) on Tuesday announced a hefty increase in its investor dividend, boosting shares as it moved up key profit targets following a strong 2021.
The package delivery company, which has been focused on building up higher-return areas such as healthcare and small-package shipping, will pay a quarterly dividend of US$1.52 per share, a 49 percent hike from the prior level.
The increase “is a reflection in confidence in the business going forward,” UPS chief financial officer Brian Newman said. “It’s also a commitment to return value to shareholders.”
The announcement concludes a banner year for the 115-year-old company, which reported profits of US$12.9 billion last year, more than nine times the level in 2020.
Revenue jumped 15 percent to US$97.3 billion.
The company expects to grow annual revenues to US$102 billion this year, a year ahead of the prior target. The company also moved up a key operating profit margin.
UPS said the dividend hike is the largest quarterly increase in its history. It expects US$5.2 billion in dividend payments this year, plus at least US$1 billion in share repurchases.
A question beyond the 2022 timeframe will be contract negotiations the following year with the Teamsters union, which represent the majority of UPS’ 458,000 US employees.
Newman, in an interview with AFP, said he is focused a “win-win” in the labor talks next year, but it “would be unrealistic” to focus on them since they are a year and a half away.
“For the moment, we’ve got costs managed in 2022,” he said. “The company is focused on increasing profitability, generating cash and returning it to shareholders.”
Newman said the results mark a sign of progress under chief executive Carol Tome, who had de-emphasized lower-return businesses under a “better not bigger” mantra.
While UPS has grown volumes under Tome, Newman praised decisions such as a January 2021 move to sell freight assets to TFI International for US$800 million. However, UPS officials emphasized that business with Amazon.com Inc, its biggest customer, remains critical.
Last year, Amazon’s share of total revenues (11.7 percent) returned to its pre-COVID-19 range after spiking in 2020, Tome said on a conference call with analysts.
“We have a great relationship with Amazon and we have mutually agreed about the volume we should take and the volume that they should keep that works best for both companies,” Tome said.
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