FedEx Corporation (NYSE: FDX) is a delivery services company that provides transportation, e-commerce, and business services globally. The company is expanding its network through continual investments, while also capitalizing on increased customer demand by innovating digitally under the FedEx brand.
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With the goal of improving shareholder value, FedEx recently revealed its long-term business plan and corporate governance actions, along with a dividend increase.
Following the announcement, shares of FedEx surged 14.41% to close at $229.95 on Tuesday, reflecting the biggest one-day gain in 29 years, which pushed the Dow transports’ price higher.
Dividend Hike
FedEx’s Board has raised the quarterly cash dividend by a whopping 53% to $1.15 per share on its common stock. The new dividend will be paid on July 11 to shareholders of record as of June 27.
FedEx has a long track record of paying dividends with consistent increases. The dividend amount has increased from $0.15 per share in 2013 to $1.15 per share currently. The company’s annual dividend of $4.60 per share now reflects a dividend yield of 2%.
FedEx’s CFO Michael C. Lenz said, “The increased dividend we announced today is the culmination of our Board’s thoughtful efforts over many months to ensure that our capital allocation strategy reflects our confidence in the trajectory of the business and increases returns for our stockholders. We look forward to sharing more detail on our strategy and long-term objectives at our investor day later this month.”
Furthermore, FedEx included the total shareholder return performance metric in its cash-based long-term incentive (LTI) program for Fiscal 2023 through 2025.
Changes to the Board
Two skilled independent directors, Amy Lane and Jim Vena, have joined the company’s Board effective immediately. These inclusions are part of an agreement with the hedge fund D.E. Shaw group. The hedge fund will also have a say when a third independent director is appointed in the future.
Raj Subramaniam, the CEO of FedEx, commented, “We are pleased to welcome Amy and Jim to the FedEx Board…We appreciate the collaboration with the D. E. Shaw group, a long-time FedEx stockholder, with whom we have maintained an ongoing and constructive dialogue in reaching this agreement.”
Wall Street’s Take
Considering FedEx’s recent updates as “a very positive development,” Stephens analyst Jack Atkins reiterated a Buy rating and a price target of $285 (23.94% upside potential) on the stock.
Furthermore, the company’s strong capital deployment activities support the analyst’s bullish stance.
Consensus among analysts is a Strong Buy based on 16 Buys and three Holds. The average FedEx price target of $287.56 implies 25.05% upside potential from current levels. However, shares have lost 22.26% over the past year.
Additionally, FedEx scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Insiders Trading
Corporate Insiders are positive about FedEx. According to the TipRanks Insiders page, corporate insiders have bought shares worth $16.9 million in the past three months. Per the SEC (Securities and Exchange Commission) filings and TipRanks’ Insider Trading Activity tool, last month, FedEx CEO Frederick W. Smith purchased 198,675 shares valued at $16.94 million.
Bottom-Line
Though labor challenges and the pandemic hampered FedEx’s financials to some extent, causing shares to decline, the recovery in volumes and the company’s focus on digital services promise long-term gains. Furthermore, high analyst ratings and insiders’ confidence indicate an attractive investment opportunity.
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