UPS Increases Dividend 11%, Projecting Strong 2011 Cash Flow

United Parcel Service Inc. raised its dividend by 11 percent today, predicting strong cash flow and signaling confidence in the economic recovery’s strength.

“We believe that 2011 is going to be a great year for UPS and we’re committed to significantly increasing distributions to share owners,” Chief Executive Officer Scott Davis said in a statement. The company forecast healthy cash flow this year and has said it may post record earnings per share.

UPS said it will boost quarterly cash payments to shareholders to 52 cents per share from 47 cents, matching a Bloomberg projection. The dividend will be payable March 2 to investors who held shares on Feb. 14, the company said.

Matt Collins, an analyst at Edward Jones & Co. in St. Louis who has a “hold” rating on the stock, said before the announcement that an increase of more than 10 percent would indicate the company expects the economic rebound to continue.

“The stronger the economy, the bigger the dividend increase,” Collins said.

Holiday volumes lifted by demand from online retailers drove Atlanta-based UPS’s revenue and profit higher than analysts estimated in the fourth quarter. International volume grew 4.8 percent as domestic shipments increased 1.7 percent.

UPS resumed its regular dividend increase last year after leaving the payout unchanged in 2009 amid the recession. The Atlanta-based company paid $1.8 billion in dividends in 2010.

UPS and FedEx Corp. are viewed as economic bellwethers because they deliver items ranging from electronics and clothing to pharmaceuticals and industrial goods.

“You’ll see a lot of dividend increases this year” as companies grow more optimistic about the economy, Collins said.

Transportation Companies

J.B. Hunt Transport Services Inc. also increased its quarterly payout today, to 13 cents from 12 cents.

“As the economy strengthens and tax rules have been clarified, companies will be more likely to increase the dividend,” Collins said.

Two other companies in the Dow Jones Transportation Average may boost dividends by May, Bloomberg projections indicate. CSX Corp. may increase to 28 cents from 26 cents on Feb. 9, and Expeditors International of Washington Inc. may increase by 1 cent to 21 cents a share on May 6.

Bloomberg dividend projections are based on seven criteria including a company’s guidance, dividend history, regression analysis and put-call parity.

UPS climbed 25 cents to $74.29 in New York Stock Exchange composite trading. The shares have increased about 26 percent in the past 12 months.

To contact the reporter on this story: Sonja Elmquist in New York at Selmquist1@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.