1 Magnificent High-Yield Stock Down 60% to Buy and Hold Forever

The stock price of United Parcel Service (NYSE: UPS) has plunged by nearly 60% since hitting a high-water mark of $233.72 a share in early 2022. The pandemic period was a good one for package delivery companies, but the post-pandemic period has been brutal for UPS. One of the big issues is the company's aggressive move to reposition itself for the long term. The early results hint that things are going well, even though Wall Street is still deeply negative on UPS stock.

First, the dividend story

United Parcel Service has increased its dividend annually for 16 years. The most recent dividend increase came at the start of 2025. It was a token penny per share per quarter, the same as the increase at the start of 2024. These are the types of increases that a company makes when the board of directors wants to keep a dividend streak going, despite the fact that the business is under pressure.

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Essentially, the small increase is meant to be a signal. It says that management and the board believe in the long-term future of the business. That said, Wall Street is very clear that it's not quite as confident. That's highlighted by the massive stock price decline and UPS' huge 7% or so dividend yield. These are clear indications that investors are worried about the future.

On the dividend front, there is good reason to be concerned. The dividend payout ratio, which compares dividends to earnings, is hovering around 100%. While dividends are actually paid out of cash flow, the cash dividend payout ratio, which compares dividends to free cash flow, is hovering around 120%. A company can support a dividend with things like debt for a period of time, but eventually UPS needs to see its financial results improve if the dividend is going to survive.

At least at the current level, it's unlikely that the dividend will be eliminated. A reset would be more likely. That brings up the big story with UPS. The company is in the middle of a business reset as it attempts to turn its financial performance in a better direction.

What's the plan for UPS?

UPS is trying to slim down and improve its profitability. That's not an easy task when you consider the magnificent business it has created. Package delivery is a capital-intensive operation and a logistical nightmare. It would be difficult, if not impossible, to replace what UPS has built. At the same time, paring down the operation needs to be handled slowly and carefully, so as not to disrupt the flow of the business.

This is a multi-year effort. It has included selling entire business lines, closing facilities, selling assets, making capital investments in technology, and reducing exposure to less profitable customers while growing relationships with more profitable customers. Right now, more money is going out the door at the same time that less revenue is coming in.

Reading the company's financial statements hasn't been fun. For example, the top line fell 3.7% year over year in the third quarter of 2025. Adjusted earnings declined 1.1%. However, hidden behind those numbers, there's a very notable positive.

Revenue fell more than adjusted earnings, which means profitability improved. The company's adjusted operating margin was up 110 basis points, rising from 8.9% in Q3 2024 to 10% in Q3 2025.

That's exactly what management is attempting to achieve as it works on this turnaround effort. A further example of this progress is the 9.8% improvement in the company's revenue per piece metric in the U.S. division, its most important business segment. Customer and product mix were the largest drivers of the year-over-year improvement. It looks like progress is, slowly, being made.

UPS is a long-term hold

Right now, it's best to view UPS' lofty yield as a sign of value, hinting that Wall Street is overly dour about the company's prospects. But, given the green shoots that are starting to show up when you dig into the company's financial results, investors who think in decades and not days might be wise to start paying attention to UPS' stock. A big part of that is based on the business itself, which is industry-leading.

If the dividend survives, it's icing on this turnaround cake. But even if the dividend is cut, the yield is still likely to be attractive relative to the market. Go in understanding UPS' goal of becoming a better business and hold for the long term, since early successes are already showing up.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy.