Better Dividend Stock: Whirlpool vs. UPS
Whirlpool stock analysis (9.1% dividend yield)
Both Whirlpool's and UPS' shares are down heavily this year, as they've both suffered a deterioration in their trading conditions.
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For Whirlpool, it comes down to a combination of stubbornly high interest rates and competitor behavior in light of President Donald Trump's reelection. Relatively high interest rates curtail the housing market and, in turn, discretionary demand (which tends to be higher-margin than replacement demand) for housing appliances. Consequently, Whirlpool's first-quarter organic sales rose just 2.2% year over year, with organic sales flat in its key major domestic appliance North America business.
Whirlpool's sales were also highly likely affected by competitor behavior in the fourth quarter of 2024 and the first quarter of 2025. CEO Marc Bitzer said on the recent earnings call: "Asian appliance producers significantly increased imports into the U.S. ahead of the tariffs in the first quarter and fourth quarter, essentially loading the U.S. industry. This market disruption will likely continue into Q2 as competitors attempt to sell through their inventory."
With the first and second quarters negatively affected by such actions, 30-year mortgage rates still above 6.5%, and general uncertainty in the economy concerning tariffs, this casts some doubt on management's decision to maintain its full-year guidance.
Whirlpool's full-year guidance implies that its dividend is sustainable. For example, the guidance calls for sales of $15.8 billion with an ongoing earnings before interest and tax (EBIT) margin of 6.8%, implying an ongoing EBIT of $1.07 billion, dropping down to $500 million to $600 million in free cash flow (FCF). That's more than enough to cover the the $384 million in dividends that Whirlpool paid last year.
That said, there's a significant risk to the dividend if Whirlpool falters this year. The company has $4.8 billion in long-term debt and $1.85 billion in debt maturing this year, of which it plans to pay down $700 million and refinance $1.1 billion to $1.2 billion. Any significant deterioration in the FCF outlook may cause management to cut the dividend to shore up its balance sheet, not least in paying down debt.
UPS stock analysis (6.8% dividend yield)
Continuing the theme of looking at dividend sustainability, UPS management is clear on three things regarding the matter:
Its longstanding aim is to pay out 50% of its earnings in dividends, and it's committed to sustaining and growing the dividend
The current dividend of $6.56 per share is barely covered by the Wall Street analyst consensus for UPS earnings in 2025 of $7.11, implying a payout ratio of 92%
Management expects $5.7 billion in FCF in 2025, barely covering the $5.5 billion cash dividend
Whether you look at the payout ratio in terms of earnings (as management does) or FCF, UPS' ability to pay its dividend is beginning to look stretched. At the same time, UPS management is trying to finesse a 50% reduction in Amazon.com delivery volume by the second half of 2026, while dealing with a deteriorating demand environment. This could cloud UPS' ability to generate earnings and cash flow over the near term.
In its key U.S. domestic market, the decline in its average daily volume (ADV) in February and March was "higher than we expected," according to CEO Carol Tome on the earnings call. Moreover, UPS guidance for the second quarter calls for a U.S. domestic year-over-year ADV decline of 9%. Management declined to update its full-year guidance.
UPS or Whirlpool?
On balance, UPS' dividend looks more sustainable than Whirlpool's, so it wins the contest. UPS has $19.5 billion in long-term debt, which looks manageable compared to guidance for $5.7 billion in FCF in 2025. Whirlpool's $4.8 billion in long-term debt is far higher than its estimated FCF of $500 million to $600 million in 2025.
However, there's a good chance both could cut their dividends by the end of the year. That doesn't mean they are unattractive stocks; it just means anyone buying in for the dividend alone needs to prepare for potential disappointment.
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