Smart Dividend Portfolio Edition #48: Packed with Returns
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Dear Investor,
Welcome to the 48th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: February 17, 2025
Another eventful week saw main stock indexes close in the green. The Dow Jones Industrial Average (DJIA) rose by 0.55%, while the S&P 500 (SPX) was up by 1.47%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) jumped by 2.58% and 2.90%, respectively.
The S&P 500 was on its way to posting a new record early on Friday but ended with a minute loss after a choppy session. Still, the anxiety seen in the previous two weeks somewhat subsided in the past five trading days, helping investors take worse-than-expected consumer and inflation data in stride.
Both CPI and PPI reports came in above projections, with the forward-looking producer-price index reflecting the persistence of wholesale inflation and hinting at higher February CPI readings. However, while stocks initially sold off following the news, major indexes recouped losses and rallied as Trump’s tariff update eclipsed economic news. The President signed an order to explore reciprocal tariffs on U.S. trading partners but stopped short of implementing the measures immediately.
U.S. retail sales declined in January by the most in nearly two years as consumers pulled back after a strong year-end spending spree. Economists explain the dip in sales by a spell of cold weather observed in much of the country last month, coupled with the devastating LA wildfires. Conversely, economic data around the turn of the year is usually noisy, while the strong decline in retail sales isn’t consistent with the climb in inflation.
Last week, stock performance was also supported by strong earnings and other positive corporate news. With 77% of the S&P 500 companies having reported, earnings growth for the fourth quarter of 2024 is on track to be the highest since the end of 2021. The blended (actual plus forecasted) EPS growth rate stands at 16.9%, surpassing earlier estimates and represents a significant uptick from previous quarters.
The robust performance is largely driven by Financials, Communication Services, and Consumer Discretionary. The Financials sector has reported a remarkable 51.8% year-over-year earnings growth, driven by strong results from major banks. Companies in the Communication Services have so far shown a 30% EPS growth, while Consumer Discretionary firms have increased their earnings by 25.4%. Meanwhile, the Information Technology sector, which had led earnings growth in previous seasons, reported an annual increase of 16.4%, below the S&P 500 average of 16.9%.
Despite the blockbuster earnings season, stocks have been largely range-bound for almost three months. With great earnings news lacking the power to drive stocks to new highs, the next catalyst must arrive from another direction – either policy (i.e., lower taxes) or a potential resumption of Fed rate-cuts. On the other hand, company- and sector-specific drivers may yet return to the fore. Thus, another AI or other cutting-edge tech breakthrough could reinvigorate the tech rally, helping tech stocks resume their lead.
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This Week’s Quality Dividend Stock Idea
FedEx (FDX) is a leading global logistics and delivery company specializing in express shipping, freight transportation, and supply chain management. Its operations span overnight parcel delivery, ground shipping, and international logistics solutions through its FedEx Express, FedEx Ground, and FedEx Freight segments.
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Legacy of Innovation and Global Expansion
Founded in 1971 by Frederick W. Smith, FedEx pioneered overnight package delivery, launching operations in 1973 with 14 aircraft and a hub-and-spoke model. By the 1980s, it expanded into Europe and Asia, diversifying into freight and logistics. The company’s strategic acquisitions, such as Caliber System in 1998 and Kinko’s in 2004, bolstered its ground delivery and retail presence. Furthermore, the 2016 acquisition of TNT Express strengthened its European network.
FedEx has driven earnings growth through automation, aircraft modernization, and e-commerce logistics, leveraging the rise of online shopping. Amid industry challenges in the 2020s, FedEx has implemented restructuring initiatives, including consolidating its Express, Ground, and Freight segments into a unified operating model to drive efficiency and profitability.
The company handles 17 million packages daily, facilitating trade across 99% of the world’s GDP.
Today, with a market capitalization of approximately $60 billion and FY23 revenue of $90.2 billion, FedEx ranks #46 on the Fortune 500 list. Its focus on digital transformation, sustainability, and last-mile delivery solutions supports long-term growth.
Integrated Energy Business
ExxonMobil operates across upstream, downstream, and chemical segments, generating revenue primarily from crude oil, natural gas, petroleum products, and petrochemicals.
When it comes to upstream production, ExxonMobil explores and produces oil and gas from conventional and unconventional resources. The acquisition of Pioneer Natural Resources bolstered its Permian Basin operations, enhancing long-term production and efficiency.
ExxonMobil’s downstream operations consist of refining crude into fuels like gasoline, diesel, and jet fuel, and the megaproducer benefits from economies of scale and a global distribution network. The chemical segment produces materials for industries like packaging and automotive, adding diversified revenue streams.
Disciplined capital allocation, cost efficiencies, and investments in high-return projects support the company’s earnings outlook. ExxonMobil has prioritized low-cost production, particularly in the Permian Basin and Guyana, where it holds advantaged assets with strong margins. With the Pioneer acquisition, ExxonMobil achieved its goal of over 50% of Upstream production from advantaged assets (Permian, Guyana, LNG) three years early. By 2030, these assets will contribute over 60%, adding 1.2 MOEBD (million barrels of oil equivalent per day), with total production reaching 5.4 MOEBD.
Expanding Through Strategic Acquisitions
FedEx operates a global transportation and logistics business, generating revenue through its core segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. FedEx Express, the company’s largest segment, offers time-definite air cargo services with premium pricing. FedEx Ground provides cost-effective, scheduled deliveries, benefiting from strong e-commerce demand. FedEx Services supports all segments with technology solutions, customer support, and business optimization tools.
FedEx Freight, one of North America’s largest less-than-truckload (LTL) carriers, specializes in high-margin freight transportation. Less-than-truckload is a shipping method that combines multiple smaller shipments into one truck. In December 2023, FedEx announced the spin-off of its LTL segment, FedEx Freight, into a separate publicly traded company. The move, set for completion by early 2026, aims to create two independent entities, each focusing on its core strengths. Post-spinoff, FedEx will concentrate on parcel delivery and logistics, while FedEx Freight will become North America’s largest pure-play LTL carrier, maintaining commercial and operational ties with FedEx.
FedEx has pursued several key acquisitions to expand its capabilities and strengthen its global footprint. In 2015, it acquired GENCO, a leading third-party logistics provider, enhancing its expertise in reverse logistics, including returns, repairs, and recycling. Reverse logistics is the process of moving the products back to the manufacturer or distributor after they have been sold. The 2016 acquisition of TNT Express significantly bolstered FedEx’s European presence by integrating TNT’s extensive road network with FedEx’s global air express capabilities. In 2018, the company acquired P2P Mailing , improving its international e-commerce transportation solutions. Further expanding its e-commerce services, FedEx acquired ShopRunner in 2020, a platform connecting brands with online shoppers. In October 2024, FedEx acquired Logictransport, further enhancing its logistics capabilities.
These strategic acquisitions have strengthened FedEx’s service portfolio, improved operational efficiency, and positioned the company for continued growth in the evolving logistics and e-commerce landscape. Investments in digital logistics, international expansion, and high-margin freight services further diversify revenue streams.
Resiliency Through Efficiency
FedEx’s carries a amount of notable debt, which stands above the industry average. However, credit rating agencies do not view this as a risk, granting the company investment-grade ratings: “BBB” at S&P and “Baa2” at Moody’s. The company’s strong interest coverage ratio ranks in the top 30% of the industry, indicating its ability to comfortably meet interest payments. FDX has implemented strategies to optimize its debt levels, aiming to strengthen its balance sheet and improve its credit profile.
The company’s earnings growth is driven by pricing power, network efficiency, and strategic cost control. The logistics giant has optimized its air and ground operations through automation, AI-driven route planning, and facility modernization. In fiscal Q2 2025, FDX’s revenues dipped slightly to $22 billion, while adjusted EPS rose 1.5% year-over-year to $4.05, above analyst consensus.
Furthermore, FDX has managed to navigate tough macroeconomic conditions and the cyclicality of the transportation industry by enhancing profitability through operational efficiency. Despite revenue declines in FY24, earnings grew 9.5% year-over-year due to lower structural costs. As the company navigates an uncertain demand environment, it has revised its FY 2025 adjusted EPS outlook slightly downward, reflecting its conservative management and accounting for industry headwinds. FDX plans to keep FY25 capex flat at $5.2 billion while enhancing efficiency and pricing strategies to sustain earnings growth and financial stability.
Meanwhile, FedEx’s long-term profitability enhancement is a work in progress, as the company focuses on two major strategic programs, Network 2.0 and DRIVE. The Network 2.0 initiative focuses on consolidating its separate Express and Ground delivery operations into a unified network. By integrating these services, FedEx aims to eliminate redundant routes and facilities, thereby reducing costs and improving service efficiency. The company projects that Network 2.0 will yield $2 billion in savings by fiscal year 2027.
Launched in mid-2022 as a comprehensive transformation program, DRIVE seeks to optimize FDX’s cost structure and enhance decision-making processes across the organization. The initiative targeted over $4 billion in cost reductions by fiscal year 2025. The company’s latest results signal successful progress towards this target. Specifically, the projected FQ2 25 increase in operating income – despite a revenue dip – is primarily attributed to the DRIVE initiative.
Shareholder Value at a Discount
Since 2002, FedEx has consistently increased its annual dividend, reinforcing its commitment to shareholder returns. Although it was on track to achieve “Dividend Aristocrat” status, the company prioritized financial stability during the COVID-19 pandemic, which strained its logistics operations despite a surge in e-commerce-driven package volume.
Currently, FedEx maintains a dividend payout ratio of 31.9%, with dividends growing at a 23% CAGR over the past three years. Its 2.2% dividend yield exceeds the sector average of 1.4%, and analysts project a ~8% increase in the current fiscal year.
FedEx actively enhances shareholder value through buybacks. In December 2021, it authorized a $5 billion share repurchase program, followed by an additional $5 billion authorization in March 2024. In fiscal Q2 2025, the company completed $1 billion in buybacks, bringing its total FH1 repurchases to $2 billion, with another $500 million planned for the second half of the fiscal year. FedEx aims to return $3.8 billion to shareholders in FY25.
From FY21 to FY23, FedEx returned over $21.2 billion to investors through dividends and buybacks, increasing its dividend by seven fold. These actions highlight its strong commitment to rewarding shareholders.
Over the past year, the stock has gained about 7% and currently trades at a large discount to its sector. In addition, its modest P/E ratios are near the bottom of the peer valuation range.
Wall Street analysts forecast a 25% average upside for FedEx over the next 12 months, with some recent ratings projecting over 40% growth. Analysts also view the planned spin-off as a value-creating move, expecting it to unlock valuation differences with peers and provide long-term benefits for investors.
Investing Takeaway
FedEx’s strong global presence, strategic acquisitions, and focus on operational efficiency position for long-term growth. The spin-off of FedEx Freight is expected to unlock value, while consistent dividend increases and share buybacks highlight its commitment to shareholders. With a consistent dividend history, aggressive share repurchases, and a solid credit profile, FedEx continues to reward investors while maintaining financial flexibility.
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Dividend Investor Portfolio
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Portfolio News
▣ Kroger (KR) announced David Kennerley will serve as its new CFO. Kennerley will succeed Todd Foley as the retailer’s SVP and CFO, effective April 3. Kennerley will join Kroger as SVP on March 10, while Foley stays on as interim CFO through the end of fiscal 2024. Foley will continue as SVP and serve on the leadership team, ensuring a smooth transition through Kroger’s first quarter.
▣ JPMorgan Chase (JPM) COO Jenn Piepszak stated in a conference hosted by Bank of America that JPM’s trading revenue could rise in the “low double digits” percentage year-over-year in Q1, while investment-banking fees could increase by a “mid-teens” percentage. In comparison, the bank’s investment banking unit’s fees rose 49% year-over-year in Q4. Meanwhile, according to reports, JPM has started widespread layoffs. According to media reports, JPMorgan has cut about 1,000 employees in February and is planning to announce further workforce reductions throughout the year.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.79% | +9.37% | $5,758.21 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Mar 14, 2025 | Apr 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.52 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Mar 07, 2025 | Mar 24, 2025 | 2.56% | $20.84 |
| Edison International (EIX) | Mar 28, 2025 | Apr 30, 2025 | 5.12% | $3.31 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Mar 10, 2025 | Mar 17, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Mar 07, 2025 | Mar 31, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Mar 21, 2025 | Apr 09, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Mar 06, 2025 | Mar 27, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Mar 21, 2025 | Apr 04, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
