UPS vs. WAB: Which Dividend-Paying Transportation Stock to Bet on Now?

United Parcel Service UPS and Westinghouse Air Brake Technologies Corporation WAB, operating as Wabtec Corporation, are two prominent names in the Zacks Transportation sector. Both companies have announced dividend hikes this year despite the prevalent economic uncertainties, reflecting their shareholder-friendly approach.

Dividend-paying stocks provide a solid income stream and have fewer chances of experiencing wild price swings. Dividend stocks are safe bets for creating wealth, as the payouts generally act as a hedge against economic uncertainty, like the current scenario. 

In February, Wabtec’s board of directors approved a dividend hike of 25%, thereby raising its quarterly cash dividend to 25 cents per share ($1.00 annualized) from 20 cents (80 cents annualized). Also, in February, UPS’ board of directors approved a dividend hike, thereby raising its quarterly cash dividend to $1.64 per share ($6.56 annualized) from $1.63 ($6.52 annualized). 

Wabtec Dividend Yield (TTM)

Wabtec dividend-yield-ttm | Wabtec Quote

United Parcel Service Dividend Yield (TTM)

United Parcel Service. dividend-yield-ttm | United Parcel Service. Quote

Sustainability of UPS’ Dividends in Question Unlike WAB

No doubt UPS’ most recent dividend hike reflects its shareholder-friendly approach, but questions about the sustainability of its dividend arise. United Parcel Service’s elevated dividend payout ratio (the percentage of net income paid out as dividends) highlights the concerns associated with its ability to maintain dividend payouts over the long term.

We remind investors that in the early 2020s, when UPS’ business was flourishing, driven by exponential e-commerce growth during the peak pandemic period, the company made huge dividend payments. Free cash flow has been on a decline since then, touching a high of $9 billion in 2022.

Currently, UPS' elevated dividend payout is hurting its operational flexibility, with free cash flow barely covering the dividend. At 2024-end, free cash flow was $6.3 billion, not much above its dividend payments of $5.4 billion. United Parcel Service expects to generate free cash flow of around $5.7 billion in 2025. Dividend payments are expected to be roughly $5.5 billion.  On the other hand, WAB’s much lower dividend payout ratio implies that concerns associated with its ability to maintain dividend payouts over the long term are absent.

While we have considered the dividend-paying abilities of both the transportation stocks, let's delve deeper to compare other relevant metrics to determine whether WAB or UPS is a better investment now.

Price Performance of WAB and UPS

WAB has navigated the recent tariff-induced stock market volatility well, registering a 5.1% year-to-date gain, while UPS stock has performed miserably in 2025 so far, declining in double digits.

YTD Price Comparison

UPS’ lackluster price performance is mainly due to the revenue weakness as geopolitical uncertainty and high inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario has led to a decline in the volume of packages shipped. 

On the other hand, WAB’s recent strength is driven by its focus on new technologies to improve safety and reliability, apart from its restructuring actions and cost-cutting initiatives. The improving global rail supply market in the post-COVID scenario is another positive for the company. The Association of the European Rail Industry, UNIFE, expects the global market for railway systems and services to grow at an annual average of around 3% until 2027-29.

How Do Zacks Estimates Compare for WAB & UPS?

The Zacks Consensus Estimate for WAB’s 2025 and 2026 sales implies a year-over-year increase of 4.6% and 4.9%, respectively. The consensus mark for WAB’s 2025 EPS highlights a 15.3% year-over-year drop. The 2026 EPS consensus mark indicates an 11.5% year-over-year increase. Moreover, the EPS estimates for 2025 and 2026 have been trending northward over the past 30 days.

The Zacks Consensus Estimate for UPS’ 2025 sales estimate implies a 4.1% year-over-year decrease, while the same for 2026 implies a 0.9% year-over-year increase. The consensus mark for UPS’ 2025 EPS highlights an 8.3% year-over-year decrease. The same for 2026 implies a 13.8% year-over-year increase. The EPS estimates for 2025 and 2026 have been trending southward over the past 30 days, unlike WAB.

WAB Appears to be More Pricey Than UPS

WAB is trading at a forward sales multiple of 3.08, above its median of 2X over the last five years. WAB has a Value Score of D. Meanwhile, UPS has a Value Score of C, with its forward sales multiple at 0.92, below its 5-year median of 1.54.

Conclusion

WAB’s expensive valuation (compared to its 5-year median) seems to suggest that investors are to pay a premium for this key player in the transportation sector. Agreed that both stocks focus on paying dividends but WAB’s lower dividend payout ratio puts to rest concerns about dividend sustainability, unlike UPS.

WAB’s better price performance and northward earnings estimate revisions highlight the fact that its focus on new technologies to improve safety and reliability, apart from its cost-cutting actions, is working well.

Given its prospects, WAB seems a better pick than UPS now.

While WAB carries a Zacks Rank #2 (Buy), UPS is currently #5 Ranked (Strong Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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