For decades, UPS and FedEx were untouchable titans in the shipping world — dependable, dominant, and dividend-paying. But the market landscape is shifting rapidly, and what once looked like an impenetrable moat is starting to resemble a dry riverbed.
As a UPS shareholder, I’ve always admired the brand’s consistency. But lately, admiration has turned into concern. Not because the trucks stopped running — but because they’re running emptier routes in a world that’s quickly moving on from their services.
Amazon Has Outgrown the Competition
What started as an online bookstore is now a logistics monster. Amazon has built its own shipping empire, from Sprinter vans to cargo planes, cutting the need for outside help. In fact, it’s been reported that Amazon delivers more packages annually in the U.S. than FedEx — and is closing the gap with UPS.
Every package Amazon delivers themselves is money UPS and FedEx don't earn. And it’s not just cost-saving. It’s about total control over the customer experience — something no third-party delivery service can offer.
Walmart’s Spark Is Quietly Chipping Away
It’s not just Amazon. While shopping at Walmart recently, I noticed something small but telling: a Spark delivery van parked right outside the store, not a warehouse. That means last-mile delivery is coming straight from the shelves to homes, powered by gig workers.
Walmart’s Spark Driver program is now available in thousands of locations. Like Uber Eats for groceries, it eliminates the need to involve FedEx or UPS at all. It’s faster, cheaper, and Walmart keeps the margin.
That’s a big hit to FedEx’s ground segment, which already struggled in 2023 and isn’t looking much better in 2025.
Dividend Pressure and Margin Compression
Both UPS and FedEx have paid steady dividends over the years — one of the reasons I invested. But the foundation is starting to crack:
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UPS’s dividend payout ratio is creeping higher, and with slower revenue and rising union labor costs (thanks to a newly ratified Teamsters contract), free cash flow is getting tight.
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FedEx, trying to restructure and unify Ground and Express, is bleeding margin as it races to modernize before it’s too late.
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Neither company seems to have a defensive moat against Amazon’s internal logistics or Walmart’s gig delivery strategy.
Unless they shift focus — perhaps doubling down on B2B, healthcare logistics, or international shipping — these once-dependable dividend machines may become income traps.
Investor Takeaway: Don’t Ignore the Warning Signs
The market tends to reward companies that adapt quickly. Right now, Amazon and Walmart are not just adapting — they’re dictating the new logistics playbook.
Meanwhile, UPS and FedEx are playing catch-up in a race they helped design, but no longer lead.
As an investor, the big question isn’t just whether the dividend is safe today, but whether the business model will even support it tomorrow.
If you're holding UPS or FedEx purely for the yield, you may want to ask yourself:
"Am I investing in a legacy… or in a leader?"
For me, I smell risk and I'm holding back on the Transports. I will not likely be adding shares of FDX or UPS.
Disclaimer: The views expressed here are my personal opinions and are not financial advice. Always do your own research before making any investment decisions. I am not a licensed financial advisor, just an informed (and occasionally frustrated) shareholder sharing observations.
