Ryder Driving Home Dividends and Returns
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Progress Report: Celadon Group Inc. (NYSE: CGI), mentioned April 5, 2012 with a closing price at $15.84, is currently off around $2 at $13.88 (July 26, 2012).
United Parcel Service (NYSE: UPS) reported a second quarter earnings miss and subsequently cut the company’s earnings outlook, so the stock is taking a bit of a beating, down as much as 4% (just under $75, July 26). UPS is beating the tired drum of woebegone Europe and stalling international growth as the primary reasons for the earnings brown-out. Following down that same road are the aforementioned Celadon Group and FedEx Corporation (NYSE: FDX), trading around $88 per share.
When I gave Celadon a mention, we were about to enter the joyous May “sell-and-go-away” period, and the month of April certainly provided plenty of downward momentum going into this summer. Celadon has had a respectable run of quarterly earnings beats, and it shouldn’t come as a surprise to anyone if that continues when the company reports July 30th.
UPS still beat year-over-year earnings-per-share by 7-cents ($1.16 per share versus $1.09 prior year), but the estimate was $1.17 per share, so start the sell-off. UPS offers a nice dividend yield (2.9%), but given that the company is expected to close on their largest takeover (Dutch company TNT Express) at some point in the 4th quarter this year, making Brown the market leader in Europe, I’ll look elsewhere for dividend safety. Increased exposure to Europe doesn’t instill confidence that the parcel delivery giant will bring decent returns along with the annual dividend payout of $2.28 per share.
FedEx doesn’t report until September 18th, and their annual payout to loyal shareholders amounts to a mere 56-cents per share (0.6% yield). So even though the company plans to undertake cost-cutting initiatives to improve margins along the growth-slowing highways of the globe, I’m not certain the share price growth potential will provide investors with adequate returns at their doorsteps.
One bright spot in the group, Ryder System, Inc. (NYSE: R), reported an earnings beat and boosted the profit outlook for the remainder of the year. The company started 2012 over $54 per share, but they currently trade closer to the lower end of their 52-week range ($33-$60), at just over $38 a share. Ryder has given investors a 5th straight double-digit growth outcome, and given the prospect of the potential uptick in housing, they could continue moving upward. They also pay shareholders $1.24 per share annually for a juicy yield of 3.5%. We should expect to see a bit of a pullback after the earnings hoopla has subsided; there's no hurry.
So as I continue my summer stock swan song and look toward higher yielding dividend holdings, I will watch for any positive movement in Celadon after they report earnings next week. Since they pay the same yield as FedEx, which amounts to a scant 8 cents per share yearly, I will consider moving my investing dollars and have Ryder deliver my dividends. They definitely seem to be the best house in this struggling neighborhood, with more potential upside in share price, as well.
Motley Fool blogger Kyle Metivier owns shares of Celadon Group, but has no position with any other ticker mentioned. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend FedEx. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.