The Ultimate High-Yield Industrial Turnaround Stock to Buy With $500 Right Now

According to the CEO of United Parcel Service (NYSE: UPS), the bottom is in. That's great news if you are looking for a turnaround stock. Add in UPS' attractive 5.2% dividend yield and there's even more to like about the shipping company's story. Here's why UPS could be the ultimate high-yield turnaround you can buy right now in the industrial space if you have $500, or more, to play with.

What does UPS do?

To keep things simple, UPS is a shipping company. Its brown trucks and brown uniformed employees are recognizable on sight and are fairly ubiquitous in urban areas. The company's real strength lies in its logistics prowess, which allows it to quickly deliver packages from one place to another at a reasonable cost.

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The package can be a one-off item, like a person sending a gift to a loved one, or bulk in nature, such as packages being sent out by a clothing company from a distribution center. It doesn't matter, UPS can get it on a truck or a plane and get it to where it needs to go.

Image source: Getty Images.

When the pandemic hit in 2020 investors got really excited by the prospects of increased online shopping. Indeed, more stuff bought online meant more stuff that needed to be shipped with a service like the one offered by UPS. However, in normal Wall Street fashion, investors got a little too excited by the story, pushing UPS' shares up dramatically in a very short period of time.

UPS data by YCharts

In 2022 that rally turned into a precipitous decline as the story didn't turn out to be as good as hoped. And UPS ran into some business issues that resulted in weak financial results. To add some color to that statement, earnings spiked at the end of 2020 and then started to trend lower.

UPS might be at an at inflection point

That said, UPS CEO Carol Tome made a bold pronouncement along with the company's third quarter 2024 earnings release, "On our last earnings call, we said that the second quarter would not only be the bottom, but a turning point for our performance, and that we would return to revenue and profit growth in the third quarter, which we did."

Some numbers will help. Revenue rose 5.6% year over year in the third quarter of 2024. Operating profit jumped 22.8%. Operating margin increased 120 basis points, going from 7.7% in the third quarter of 2023 to 8.9% in the same stanza of 2024. And adjusted earnings per share rose 12.1%. Not bad at all, and if this is the start of an improving trend, investors could quickly fall back in love with UPS' stock.

Nothing goes in a straight line, so there's likely to be some bouncing around. In fact, UPS' business is a bit seasonal, given the importance of the holiday season when it comes to shopping and sending gifts. But if the bottom is in, or even nearly in, UPS' lofty yield (backed by 15 consecutive annual dividend increases) could be a great buy for long-term income investors.

UPS: A high yield stock performing a low risk turnaround

Clearly the word "ultimate" is something that investors have to decide on themselves. However, it is hard to argue with a 5.2% dividend yield at a time when the market is yielding a scant 1.2%. Add in UPS' improving business fundamentals and you can see where turnaround investors might get excited here. All in, if you don't mind collecting a fat yield while you wait for the rest of Wall Street to catch on to the progress, you could easily attach the word ultimate to the UPS story today.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.