Package delivery giant UPS (NYSE: UPS) and defense contractor Lockheed Martin (NYSE: LMT) have dividend yields significantly above the S&P 500’s (SNPINDEX: ^GSPC) 1.3% yield. But which one is the better value stock? Here’s the lowdown.
UPS looks like the cheaper stock in the long term, but Lockheed Martin is the better option in the near term.
As you can see below, UPS is cheaper if you go by price-to-earnings (P/E) ratio but more expensive on a price-to-free-cash-flow (P/FCF) basis.
The near-term concern about UPS relates to weakness reported by several transportation and industrial companies, including 3M and United Airlines, possibly in response to uncertainty created by President Donald Trump’s tariffs. If that feeds through into a slowdown in package deliveries, UPS’ earnings and cash flow expectations could come under threat. Its expected earnings don’t cover its $5.5 billion dividend well, so any shortfall in earnings could lead to pressure on its dividend (which yields 5.6% at Friday’s closing price).
In contrast, Lockheed Martin’s dividend (yielding 2.8%) is well covered by expected earnings per share (EPS), and a $176 billion backlog gives certainty around its earnings. It wins out over the near term.
|
Company |
Earnings per share 2025 (est.) |
P/E ratio |
Free cash flow 2025 (est.) |
P/FCF Ratio |
Dividends per share 2025 (est.) |
EPS/DPS coverage |
|---|---|---|---|---|---|---|
|
UPS |
$7.87 |
14.6 |
$5.7 billion |
17.1 |
$6.56 |
1.2 times |
|
Lockheed Martin |
$27.22 |
16.2 |
$6.7 billion |
15.4 |
$13.2 |
2.1 times |
Data source: Company presentations, Yahoo Finance analyst consensus. EPS is earnings per share, and DPS is dividend per share.
Thinking longer term, UPS has plenty of growth prospects from focusing on healthcare and small and medium-sized businesses. Also, the plan to reduce Amazon‘s volume by 50% by the end of 2026 makes sense as it removes low-margin volume from its delivery base.
On the other hand, Defense Secretary Pete Hegseth is widely reported to want to cut the defense budget by 8% a year over the next five years. That could challenge the long-term outlook for defense companies like Lockheed Martin.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves: