Wal-Mart vs. United Parcel Service: Which Stock's Dividend Dominates?
Two of the retail economy's most important stocks, Wal-Mart and United Parcel Service, square off in a battle of dividend fundamentals. Find out which one belongs in your portfolio.
But few of us can invest in every single dividend-paying stock on the market, and even if we could, we're likely to find better gains by being selective. Today, Wal-Mart (NYSE:WMT) and United Parcel Service (NYSE:UPS), two companies that have come to symbolize different aspects of the new globalized retail economy, will square off in a head-to-head battle to determine which offers a better dividend for your portfolio.
Founded in 1962, Wal-Mart(NYSE:WMT) is the world's largest retailer, and ranked as the world's second-largest public corporation on the Fortune Global 500 list in 2013. The company operates more than 11,000 stores under 69 banners in 27 countries, and also maintains e-commerce websites in 10 countries. The Arkansas-based colossus is perhaps more responsible than any other company for changing the way America shops, as its supply chain advancements have helped set the standard for globally-oriented retail operations for decades. However, Wal-Mart has also become a symbol of the purported evils of globalism, as these same supply chain advancements have spurred the growth of sweatshop labor in the developing world while simultaneously crowding smaller local retail enterprises out of many communities.
Founded in 1907, United Parcel Service(NYSE:UPS) is the world's largest package-delivery company by revenue and volume, and is a global supply chain leader, making it an ideal complement to Wal-Mart's retail operations. UPS delivers roughly 1.8 million packages each business day to over 200 countries and territories. and also provides supply chain solutions to customers in over 175 countries and territories. In its last few decades, UPS has expanded enormously through the acquisition of nearly 40 companies, which have included retail shipping services, trucking and air freight, and international trade services.
Wal-Mart is one of investors' favorite dividend stocks because it's paid uninterrupted dividends for a period of 39 years since initiating payment in 1974. That's an easy win for Wal-Mart over UPS, which only began paying quarterly dividends in 1999, according to Dividata.
According to Dividata, UPS has been increasing its dividend at least once per year since 2010, after holding steady in 2009 during the global financial crisis. On the other hand, Wal-Mart has raised its dividend payments every year since 1975, which works out to 38-year dividend-raising streak. This is even more lopsided in Wal-Mart's favor than the first contest.
Winner: United Parcel Service, 1-2.
Winner: United Parcel Service, 2-3.
Wal-Mart may have won the best-of-five on the basis of its history, but investors should never base their decisions on past performance alone. Tomorrow might bring a far different business environment, so it's important to also examine each company's potential, whether it happens to be nearly boundless or constrained too tightly for growth.
Wal-Mart has been trying to replicate Amazon's e-commerce business model.
Wal-Mart bought a controlling stake in Yihaodian to scale up its online sales in China.
It plans to open a new Internet tech development lab in nearby Sunnyvale next year.
Wal-Mart's testing a convenience-store format and plans to open 300 such stores by the end of next year.
UPS has the largest fleet of gas-powered vehicles in the U.S.
UPS could be eying self-driving trucks for higher operational efficiencies.
The company will offer 3-D printing services through its franchised UPS Store chain.
The shift toward online retailing has immense long-term benefits for delivery services.
Several governments have launched investigations against Wal-Mart over bribery allegations.
Amazon and other online retailers continue to grow much faster than brick-and-mortar retail.
High unemployment rates and increased payroll taxes continue to batter the U.S. retailers.
Amazon teamed with the United States Postal Service for Sunday package deliveries.
UPS is losing high-priced business as international shippers switch to low-cost services.
In this writer's humble opinion, it seems that Wal-Mart has a better shot at long-term outperformance, as its aggressive expansion plans in emerging markets have helped offset domestic weakness. However, the company's once-indomitable supply chain advantage has eroded, and a shift to online retail could ultimately tip UPS into the lead as more consumers decide that they'd rather have their purchases delivered from a nearby warehouse instead of bagged up at a checkout line. You might disagree, and if so, you're encouraged to share your viewpoint in the comments below. No dividend is completely perfect, but some are bound to produce better results than others. Keep your eyes open -- you never know where you might find the next great dividend stock!