FedEx Dividend History: Is it a Buy?
FedEx Dividend History: Here is a detailed analysis of FedEx’s dividend history and the opportunities that it offers in the next few months and years
FedEx Corporation is making headlines after a more than 20% fall in a single day after a declining profit warning from management due to poor shipping volume. It made the whole market jitter along with FedEx stock and the Nasdaq index has fallen nearly 4% in the last five days (as of 23.09.2022).
There are two ways to earn money via investing in the stock market. The appreciation in the share price is the first one and dividend income is another one. It is seen that investors do prefer high dividend yield stocks over other ones, just to have a steady source of income even in the falling market.
With FedEx having fallen 34% in the last month, it has fallen by the same amount in the last one year and coincidently by the same percentage in the last five years. (as of 23.09.2022). It is clear that even long-term investors have been unsuccessful in making profits due to the dull performance of FedEx stock, but in this article, we will look at another source of income, that is dividend payout from FedEx company and see if it was rather a profitable bet for long term investors in form of FedEx stock.
FedEx Dividend History
The table given below depicts the dividend given by FedEx company for the last eight years.
Inferences from the dividend given
The dividend payout has significantly increased over the last 8 years. It was $0.15 in the year 2014, but it touched $1.15 in the year 2022. But rather than dividend payout in absolute terms, it is more important to look at dividend yield. Dividend yield (annual or quarterly) is the dividend payout per share price. A company having $100 as share price and announcing $1 as dividend payout is better than a company having a share price of $500 and announcing $4 as payout in terms of dividend yield.
Below is the image that depicts the dividend yield of FedEx stock for the last 20 years and compares it with the share price. It is very positive for investors to note that the dividend yield for FedEx stock has always increased over the years along with the dividend payout. The yield shot up in the year 2018 as the payout increased to $0.65 per quarter, while the share price was dropping. Due to this, the yield touched 2% by June 2020.
As the pandemic hit the world, and there was a worldwide lockdown, the shipping volumes increased multifold, resulting in share prices touching new heights. But as the dividend payout remained constant at $0.65, the yield dropped to 0.89% by end of 2020.
Since 2021, the share price of FedEx stock is showing weakness, as the price continues to tumble in the reopening of the economy and decrease in the shipping volume, but the company has surprisingly kept on increasing the dividend payout. FedEx increased the
dividend to $0.75 in June 2021 and then another 53% increase in June 2022 to $1.15. Due to an increase in dividend payout and a drop in share price, the yield has touched 2.44% on the trailing 12 months basis.
Dividend Payout in Respect to Company’s Earnings
While it is good that FedEx has maintained or increased the dividend payout in the last many years, it is important to see this dividend payout with respect to the company’s earning lens. A profitable organization with increasing net profit or free cash flow does increase the dividend payout to reward the shareholders.
The image below shows FedEx earnings along with revenue in every quarter in the last 8 years.
In May 2014, when EPS was only 1.23, the dividend payout was $0.15. It was increased to $0.20 next quarter due to EPS increasing to more than $2 per share.
In June 2016, there was a sudden increase from $0.25 to $0.4 in dividend payout per share. If we look at the earnings table below, EPS increased from $2.51 to $3.30 per share from the last quarter, also there was a significant corresponding increase in the revenue of the company with respect to last quarter and all these factors made the management increase the dividend payout.
There is another significant increase from $0.5 to $0.65 in June 2018 and then $1.15 from $0.75. Both the increased match with the corresponding increase in the EPS and revenue. In June 2018, EPS shot up to $5.91 in comparison to $3.72 in the previous quarter, and in June 2022, EPS moved to $6.87 in comparison to $4.59 in March 2022.
So, FedEx management is always got motivated by increasing EPS to increase the dividend payout and reward the shareholders. Although, its share price performance has been dismal, but management has made it up by paying constant or increasing dividends every quarter.
FedEx Dividend History: Comparison with Peers
Let us find out where does FedEx stock stands in comparison to its peers
|Market Cap||Dividend Yield||Last Dividend||Annual Dividend|
|FedEx Corporation||$38 Billion||3%||$1.15||$4.60|
|UPS Corporation||$142 Billion||3.5%||$1.52||$6.08|
|C.H. Robinson Worldwide Inc||$12 Billion||2.17%||$0.55||$2.20|
FedEx Future Dividend Payout Forecast
FedEx Corporation can be classified as a regular dividend-giving company. It is not only regularly giving dividends, but it has increased it as and when possible. The latest dividend announced is $1.15 and with it, the dividend forecast comes at $4.60 for the next 12 months. FedEx has never decreased the dividend payout in the last 20 years with respect to the previous quarter and hence it can be estimated that at least $1.15 will remain as a dividend in the next 12 months.
Does Fedex Dividend History Make FedEx a Buy?
A dividend payout is always a sign of a good company that it has free cash flow that it can distribute among the investors. FedEx has been a top-notch company in terms of dividend payout. It has a dividend yield of 2.9% which is the highest in the company’s history. FedEx is not known for cutting the dividend and with the kind of EPS generated recently, investors should forget about increasing dividends anytime soon. But the big question is should one buy FedEx shares based on dividend payout?
The answer to it is no. Even if the yield touches 5%, an investor should not buy a stock based on only the merit of the dividend yield. FedEx stock is a mixed bag, it has lower earnings, a high dividend yield, and a reasonable valuation. Also, people need to understand that it is a cyclical business, with Covid being the prime time and now it is going through a dull phase.
Any investor looking for investing in FedEx shares should at least wait for next quarter or full fiscal year earnings to witness signs of improvement in the business before entering into this high dividend yield stock.
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