Should You Buy FDX Stock Now After Recent Dividend Hike?

FedEx Corporation’s FDX board of directors recently announced a 5.1% hike in its quarterly dividend payout, raising this transportation heavyweight’s quarterly cash dividend to $1.45 per share ($5.80 annualized) from $1.38 ($5.52 annualized).

FDX has hiked its dividend for the fifth consecutive year. This is encouraging, as stocks with a strong year-over-year dividend growth history often offer a greater scope of capital appreciation than simple dividend-paying stocks.

The hiked dividend will be paid out on July 8, 2025 to shareholders of record as of June 23, 2025.

FedEx’s dividend and share repurchase activity from fiscal 2022 through the first nine months of fiscal 2025 indicates a deliberate and increasingly aggressive capital allocation strategy aimed at enhancing shareholder returns. Dividends have grown substantially from $793 million in 2022 to $1.26 billion in 2024, with $1.01 billion already distributed in just the first three quarters of fiscal 2025, signaling sustained or potentially increased full-year payouts.

FDX offers a current dividend yield of 2.46% compared with the Zacks Transportation- Air Freight and Cargo industry’s 4.79%.

FDX’s Buyback Program

FDX share repurchases have gained pace, particularly in fiscal 2024 and 2025, with $2.52 billion in buybacks already executed in the first nine months of fiscal 2025, surpassing the full-year 2024 total. This acceleration in buybacks suggests that FedEx views its stock as undervalued or sees strategic benefit in shrinking its share base to boost per-share metrics. From a market behavior standpoint, FedEx remains a cyclical stock, typically reacting to shifts in macroeconomic conditions, trade activity and supply-chain dynamics.

While this capital return approach reflects management’s confidence in cash flows and long-term performance, it also warrants attention to sustainability, particularly in the context of economic uncertainty, capital expenditure needs and competition.

FDX Stock Is Inexpensive Relative to Sector

FDX is currently trading at an attractive valuation, making it potentially appealing to value investors. Its low price/sales ratio suggests the stock might be undervalued relative to its future revenuepotential, especially compared to the industry average and its historical norm.

In terms of the forward 12-month price/sales ratio, FDX is trading at 0.6, lower than the sector’s 0.96. The reading is also below its median over the last five years. The company has a Value Score of B.

FDX Stock Price Performance

The multi-year delivery deal with Amazon AMZN, inked last month, acts as a huge tailwind for FedEx by bringing in higher-margin, large-package volumes at favorable rates, especially as UPS steps back from its Amazon business.

This partnership boosts FedEx’s domestic market presence and leverages underused capacity, potentially driving improved yields and operational efficiency. In a soft freight environment and macroeconomic headwinds, the Amazon deal provides FedEx with a strategic volume boost and revenue stability, helping offset recent earnings pressures and positioning the company for better utilization and long-term growth.

Mainly due to this deal, FDX shares have outperformed the industry rival UPS UPS in a year, though they have declined significantly

FDX’s EPS Estimate Revisions Seem Unfavorable

Geopolitical uncertainty, tariff-related pressures and persistent inflation are significantly impacting FedEx’s operations, especially within its Freight segment. The segment has seen a decline in operating performance due to lower fuel surcharges, reduced weight per shipment and fewer overall shipments, key indicators of softening industrial and retail activity, highlighting pressure on both volumes and margins in a segment highly sensitive to global trade dynamics and economic sentiment.

These external headwinds are also limiting FedEx’s ability to optimize its scale and operational efficiency, directly affecting its financial outlook. Reflecting this challenging environment, the company issued a lackluster revenue forecast for fiscal 2025, projecting consolidated revenues to remain flat or slightly decline year over year.

Following the dismal guidance, analysts are seemingly turning pessimistic on the stock and revising earnings estimates downward over the past 30 days.

Other Headwinds Faced by FDX Stock

FedEx is facing mounting pressure on its bottom line as operating costs continue to rise. In the third quarter of fiscal 2025, the company reported a 2% year-over-year increase in operating expenses, driven largely by a sharp 57% jump in business optimization costs and a 2% rise in labor expenses.

Although FedEx presents these expenditures as strategic investments aimed at improving long-term efficiency, the lack of immediate returns raises doubts about the effectiveness of its cost-cutting efforts.

The company is spending significantly more to restructure operations, but so far, it hasn’t delivered meaningful cost savings. This disconnect between rising expenses and delayed benefits calls into question the timing and execution of FedEx’s optimization strategy.

Steer Clear of FDX

The negative sentiment surrounding the stock is quite evident, with earnings per share estimates for FDX moving south due to the challenges mentioned above. Investors have ample reason to be wary of investing in FDX stock currently.

As there is significant doubt about whether challenges like geopolitical uncertainty, tariff-related pressures and persistent inflation will ease this year, investor sentiment surrounding this shipping giant is unlikely to get a boost anytime soon. The combination of its weak current performance and an uncertain future casts a shadow over FDX’s prospects despite its shareholder-friendly attitude. So, the stock, currently carrying a Zacks Rank #4 (Sell), appears to be a risky prospect for investors.

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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