Top picks 2013: United Parcel Service
The package shipping company could deliver strong gains in the year ahead.
United Parcel Service (UPS) is a leading global package delivery company that provides transportation, logistics, and financial services in the United States and internationally.
Year-to-date in 2012, UPS has generated free cash flow in excess of $3.6 billion. The company repurchased 18.5 million shares for approximately $1.4 billion at an average price of $75.68 per share and paid dividends totaling $1.6 billion, a 10% increase over the prior year.
The Big Brown dividend currently delivers a solid 3.1% yield. The company ended the third quarter of 2012 with $9 billion in cash and marketable securities, which will be used to fund the acquisition of TNT Express, which management expects to close in early 2013, along with debt repayment.
Capitalizing on the low interest rate environment, UPS issued $1.75 billion of debt during the quarter, which was oversubscribed more than seven-fold with an average interest rate of 2.4% and an average 13-year maturity.
UPS expects to hit on all cylinders in the fourth quarter with operating margins expected to expand in all three business segments supported by daily volume growth of 3%.
Long-term investors should box up UPS, a HI-quality market leader with strong cash flows and growing dividends.
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Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
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