Why UPS Stock Is a Dividend Trap (Not a Bargain)

The Headline Numbers Look Tempting

UPS is trading at a forward P/E of just 12.6x—less than 60% of the S&P 500’s 22x multiple. The dividend yield hits 7.07%, nearly 6x the market average. On paper? Screams “buy the dip.” In reality? Not so fast.

Here’s What Actually Happened

UPS went public in 1999 at $60.2B valuation. Today—26 years later—it’s worth $79B. That’s a 31% total return over more than two decades. Without accounting for inflation, real returns are essentially flat. Compare that to an S&P 500 index fund investor who’d be up ~400% in the same period.

The killer? Amazon changed the game. UPS once dominated e-commerce logistics by offering premium service. Then Amazon built its own delivery network and started routing unprofitable packages elsewhere. UPS’s response: cut Amazon volumes by 50% by mid-2026. Sounds strategic. Investors heard: massive downsizing incoming.

The Real Problem

Q3 Numbers Don’t Lie:

• Domestic revenue dropped 2.6% YoY to $14.2B
• Operating profits collapsed 28% to $603M
• Consolidated revenue down 3.7% to $21.4B

Plus, UPS has already slashed 48,000 jobs (mostly drivers and warehouse workers). Management’s betting on healthcare logistics as the growth engine, but pivoting away from core business while cutting 48k workers? That’s not just restructuring—it’s contraction.

The Dividend Isn’t Salvation

Yes, it’s been raised 16 years straight. But that 7% yield exists because the stock price crashed 44% over 5 years. High yield = market pricing in structural decline, not opportunity.

Logistics is brutal margin business. Economies of scale matter. Shrinking your network while competitors circle? That’s the opposite of a moat.

The Bottom Line

UPS at 12x P/E looks cheap for a reason. The dividend is real, but chasing yield into a contracting business is how you end up bagholding. Your index fund did better over 26 years. It’ll probably do better over the next 5.