A 6% yield on a global logistics giant that has paid an uninterrupted dividend since its 1999 IPO — Robert Rapier examines whether the market is pricing UPS’s temporary restructuring pain as permanent damage below. Readers who want to see how Robert identifies income opportunities like this across the essential-service sector can explore his Utility Forecaster portfolios.

Sometimes a stock is cheap because the business is deteriorating and deserves a low valuation. Other times, investors become so focused on what has gone wrong that they are slow to recognize when the situation is beginning to improve. I think the latter may be happening with United Parcel Service (NYSE: UPS).

UPS has spent the past several years dealing with weaker package volumes, rising labor costs, a slowing economy, and the deliberate reduction of business from its largest customer. The stock has reflected all of those concerns, but the latest results suggest the market may now be discounting too much bad news.

United Parcel Service closed last week at about $105, well below the levels it reached during the pandemic-era shipping boom and roughly 14% below its 52-week high. At that price, the shares yield more than 6% and trade at roughly 14.5 times management’s expected 2026 adjusted earnings. That is not the valuation of a company investors expect to deliver much growth. The question is whether the problems depressing the valuation are permanent or whether UPS is already emerging from the most difficult part of its restructuring.

Walking Away From Bad Business

The biggest change at UPS has been its relationship with Amazon (NSDQ: AMZN). For years, Amazon was the company’s largest customer and generated enormous package volume, but volume alone does not necessarily translate into attractive profits. Management concluded that a significant portion of the Amazon business was not generating adequate returns and made the unusual decision to reduce that volume by more than 50% from 2024 levels. Most companies do not voluntarily surrender large amounts of business from their biggest customer, so the decision understandably worried investors.

UPS is trying to replace that low-margin volume with business that generates better returns. The company has been emphasizing small and midsized businesses, healthcare logistics, international shipping, and other customers willing to pay more for specialized or time-sensitive services. The second quarter provided some evidence that this strategy is gaining traction. Revenue reached $22.8 billion, U.S. domestic revenue increased 6%, revenue per package rose more than 9%, international revenue climbed 12.5%, and Supply Chain Solutions revenue increased nearly 8%.

Perhaps most importantly, management says the major reduction in Amazon volume is now essentially complete. Investors have spent much of the past year watching package counts fall while wondering what UPS would look like after that business disappeared. We are finally starting to get a clearer picture, and it suggests that fewer packages do not necessarily mean a weaker company if UPS can improve the economics of the packages it does handle.

A Leaner UPS Is Emerging

Giving up millions of packages only makes sense if UPS can also eliminate the costs associated with moving them through its network. That is why the company has been closing facilities, automating sorting operations, consolidating routes, reducing its workforce, and removing excess capacity. During the first half of 2026 alone, UPS closed operations at 45 buildings, nearly all permanently. Management says its network restructuring and efficiency programs generated roughly $1.2 billion in benefits during the first half and should produce about $3 billion for the full year.

Those changes have been expensive in the short run. Second-quarter GAAP earnings were substantially reduced by restructuring charges, particularly costs associated with employee separations. That makes the headline earnings numbers look worse than the performance of the underlying business, but those expenses are being incurred in an effort to create a smaller and more efficient network. If UPS can permanently remove billions of dollars of costs while replacing lower-margin volume with higher-value business, earnings can improve without package volume ever returning to its former peak.

Management appears increasingly confident that this is happening. Following the second quarter, UPS raised its full-year outlook for revenue, adjusted operating profit, and adjusted earnings per share. The company now expects approximately $91.2 billion in 2026 revenue and adjusted earnings of about $7.22 per share. A company facing accelerating deterioration usually does not raise all three of those forecasts at the same time, which is one reason I think investors may be placing too much emphasis on the problems of the past few years and not enough on what the business could look like after the restructuring is complete.

The Dividend Gets Your Attention

The other number that immediately stands out is the dividend. UPS currently pays $1.64 per quarter, or $6.56 annually, which translates into a yield of roughly 6.2% at the current share price. There are not many globally dominant companies offering that level of income, particularly companies with a long history of returning cash to shareholders. UPS has maintained or increased its dividend every year since becoming publicly traded in 1999, and management expects to distribute about $5.4 billion in dividends this year.

I would not ignore the warning embedded in that unusually high yield. Based on management’s current adjusted earnings forecast, the dividend consumes roughly 90% of expected earnings, which is higher than I normally like to see for a cyclical company that must continue investing heavily in its network. The dividend therefore deserves monitoring, especially if the economy weakens materially or the restructuring fails to produce the expected improvement.

What makes the situation more interesting is that earnings may be closer to a trough than a peak. If UPS realizes the expected cost savings and margins recover as lower-quality business leaves the network, dividend coverage should gradually improve without requiring a cut. That is a very different situation from a company whose payout ratio is rising because the underlying business is in permanent decline.

What the Market May Be Missing

The bearish case for UPS is not difficult to understand. Package shipping remains economically sensitive, Amazon has developed an enormous logistics network of its own, FedEx (NYSE: FDX) remains a formidable competitor, labor costs are high, and global trade remains vulnerable to tariffs and geopolitical disruptions. A dividend yield above 6% is also often the market’s way of signaling that investors see significant risk, and in this case those concerns should not simply be dismissed.

But stock prices reflect expectations about the future, not just a snapshot of current conditions. At roughly 14.5 times expected adjusted earnings, investors are not paying a premium price for UPS to execute perfectly. They are buying one of the world’s largest logistics networks, growing healthcare and international businesses, billions of dollars of anticipated cost reductions, improving revenue quality, and a dividend yield above 6%.

The key question is whether UPS is a permanently impaired business or a strong business working through an unusually painful transition. I lean toward the latter. The Amazon reduction that has weighed heavily on reported volumes is largely behind the company, revenue is growing again, management has raised its outlook, and billions of dollars of structural savings are working their way through the network. At the same time, UPS is directing more attention toward areas where customers are willing to pay for service rather than simply competing for the largest possible number of packages.

None of this guarantees a quick recovery in the shares. An economic downturn could delay the improvement, and I would continue watching both margins and dividend coverage closely. But investors rarely get paid more than 6% a year to wait for a turnaround after every problem has already disappeared. At today’s valuation, the market appears to be assuming that many of the difficulties UPS has experienced over the past several years are permanent.

I think there is a reasonable chance they are not. If UPS is already moving beyond the worst of its restructuring and begins demonstrating the earnings power of a leaner, higher-margin network, today’s valuation could eventually look unusually pessimistic. That is why I think the market may be pricing this stock wrong.

I wrote this piece about UPS because it illustrates something I look for across the essential-service sector: the market will often price a company’s temporary restructuring pain as if it were permanent damage, and that mispricing shows up most clearly in the dividend yield. In Utility Forecaster, I spend most of my time on the utilities, pipelines, water, and grid companies where this same pattern plays out — businesses with mandated demand that have been paying and growing their dividends through every kind of cycle. If you’d like to see which essential-service stocks I’m holding right now, along with my Best Buys list and monthly analysis, you can join Utility Forecaster for $49 for your first year — 50% off the regular $99 rate, with a 90-day money-back guarantee and four research reports you keep regardless.