Jim Cramer Mentions Important Factor About United Parcel Service, Inc. (UPS) Stock

We recently published 12 Hot, Cold & Stable Stocks Jim Cramer Recently Discussed. United Parcel Service, Inc. (NYSE:UPS) is one of the stocks Jim Cramer recently discussed.

Cramer discussed logistics and courier company United Parcel Service, Inc. (NYSE:UPS) as he talked about FedEx. The latter’s shares experienced some positive sentiment last week after its fiscal first-quarter earnings report. Cramer warned viewers about linking United Parcel Service, Inc. (NYSE:UPS)’s performance with FedEx as he discussed the firm’s free cash flow. United Parcel Service, Inc. (NYSE:UPS) currently pays a $1.64 quarterly dividend and has a 7.78% annual dividend yield. However, the CNBC TV host warned that the firm’s dividend might struggle due to its free cash flow:

“The market is, took up UPS with FedEx. I think it’s become very zero sum. They are very much like each other. FedEx deserves to be up 12, maybe 15. But UPS. Let’s remember, UPS, when it comes to the cash flow, I mean when you look at the free cash flow, they pay six fifty six, the dividend. The free cash flow doesn’t cover it. It’s five dollars and 27 cents. So I’m saying, if you think UPS should go up because of FedEx, you got it aaaaaalll wrong.

“[On BMO downgrade] Very smart downgrade. These, FedEx is, FedEx is killing UPS.

“Well I mean look it’s a good storied franchise but the company has said over and over again that the dividend is sacrosanct. But at a certain point, and look we know that there are a lot of companies that continue to pay a high dividend without being covered by free cash flow. I’m just saying don’t get comfortable if the free cash flow doesn’t improve, it’s going to be very hard to maintain a sixty fifty six dividend.”

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Disclosure: None. This article is originally published at Insider Monkey.