It’s no secret that ecommerce is a major long-term trend that is just starting to take hold. More and more businesses are discovering the value in selling their goods and services over the Internet and thanks to businesses like Amazon.com this is becoming the new normal. What this all means is that stuff needs to get from the seller to the buyer and that’s where today’s idea, UPS (NYSE: UPS) shines.
The Masters has an extremely limited number of global sponsors; five to be exact. And UPS is one of them. And why not? It is after all based in Atlanta, GA just a hop skip and a jump from Augusta National and it’s the world’s largest package delivery company. In fact in 2015 UPS delivered 4.7 billion packages and documents in more than 220 countries and territories.
One of the questions investors have been asking of late is in regard to Amazon’s shipping aspirations and whether that poses a threat to UPS and its ilk. While it’s not smart to underestimate anything Jeff Bezos sets his mind to, it’s also worth recognizing the fact that ecommerce today represents still just a small sliver of overall retail sales domestically; less than 10% to be exact. In other words, while there’s no question that Amazon will become a bigger part of this space going forward, there is going to be a lot of room to play in this sandbox and UPS has the brand, the reputation and the resources to help lead the way.
UPS is in good financial shape with $4.7 billion in cash and equivalents on the balance sheet. And while it maintains $14.3 billion in debt, that debt is stretched out nicely over many years and operating income covers net interest expense 24 times over. Of course a business like UPS will likely feel a bit of a pinch during times of higher fuel costs, but often those costs can be passed along to the customer in some capacity. There will be times when margins are challenged, but the longer the investor can stretch his or her timeline with UPS the better off they will be. With shares under 20 times trailing earnings today and a Masters-worthy dividend yield of 3%, UPS looks like a low risk way for investors to give their portfolio some nice stable growth.
Disclosure: I own shares of Amazon.com.
Risk: Low
The Masters has an extremely limited number of global sponsors; five to be exact. And UPS is one of them. And why not? It is after all based in Atlanta, GA just a hop skip and a jump from Augusta National and it’s the world’s largest package delivery company. In fact in 2015 UPS delivered 4.7 billion packages and documents in more than 220 countries and territories.
One of the questions investors have been asking of late is in regard to Amazon’s shipping aspirations and whether that poses a threat to UPS and its ilk. While it’s not smart to underestimate anything Jeff Bezos sets his mind to, it’s also worth recognizing the fact that ecommerce today represents still just a small sliver of overall retail sales domestically; less than 10% to be exact. In other words, while there’s no question that Amazon will become a bigger part of this space going forward, there is going to be a lot of room to play in this sandbox and UPS has the brand, the reputation and the resources to help lead the way.
UPS is in good financial shape with $4.7 billion in cash and equivalents on the balance sheet. And while it maintains $14.3 billion in debt, that debt is stretched out nicely over many years and operating income covers net interest expense 24 times over. Of course a business like UPS will likely feel a bit of a pinch during times of higher fuel costs, but often those costs can be passed along to the customer in some capacity. There will be times when margins are challenged, but the longer the investor can stretch his or her timeline with UPS the better off they will be. With shares under 20 times trailing earnings today and a Masters-worthy dividend yield of 3%, UPS looks like a low risk way for investors to give their portfolio some nice stable growth.
Disclosure: I own shares of Amazon.com.
Risk: Low
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