FedEx Corporation (FDX), the world's second-largest package delivery company, raised its quarterly dividend by a penny to 13 cents. The increased dividend will be paid on July 1 to shareholders of record as of June 17.
FedEx is committed to its shareholders in the form of dividends. In the first nine months of fiscal 2011, the company paid dividends of approximately $113 million.
From fiscal 2012, FedEx will pay an annual dividend of 52 cents per share, up 8% from 48 cents paid in fiscal 2011. Dividend hike is an annual event at FedEX Corp. In 2010, FedEx paid an annual dividend of 44 cents.
The increased dividend reflects the company’s healthy balance sheet. At the end of February 2011, cash and cash equivalents were $1.4 billion and leverage ratio (adjusted debt-to-capital) was 0.5 times, which was well below the company’s guidance of 0.7 to 1.0 times. In addition, long-term debt stood at approximately $1.7 billion.
FedEx is taking full advantage of the global economic recovery by investing strategically in key international growth markets, purchasing more efficient aircraft (Boeing 777 freighters) and streamlining its network.
Following stiff competition from its close rival United Parcel Service Inc. (UPS), the company is undergoing several initiatives, such as continued yield (revenue per package) improvement as well as strong pricing, which are expected to fuel earnings growth in the years ahead. Further, integration of the Freight segment will help it in returning to profitability in the fourth quarter.
However, rising fuel prices due to the ongoing political turmoil in the Middle East and North Africa and several cost headwinds such as higher compensation and benefits and increased aircraft maintenance will likely restrict earnings growth at FedEx. Moreover, the short-term impact of the earthquake and tsunami in Japan on the company’s operational costs, shipping patterns and the global economy is still unknown.
Consequently, we have a long-term Neutral rating on FedEx. For the short term (1–3 months), the stock retains a Buy rating with a Zacks #2 Rank.
FEDEX CORP (FDX): Free Stock Analysis Report
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