Is FedEx's High-Yielding Dividend Safe?

FedEx (FDX 3.14%) is a logistics giant that's known all around the world. It's been a safe, blue chip stock to own over the years. Not only does it have strong financials and post consistent profits, but it also offers investors an attractive dividend, which currently yields 2.5% -- much higher than the S&P 500's 1.2% payout. There have, however, been concerns of late about its growth. Trade wars and tariffs are weighing on businesses, and the worry is that a recession may be on the horizon in not only the U.S., but in other countries as well. And a slowdown has already been taking a toll on the business. Given the challenges FedEx is facing, should you be worried about its dividend? Image source: Getty Images. What FedEx's latest numbers say On June 24, FedEx posted its fourth-quarter earnings numbers for the period ended May 31. The company finished the fiscal year with revenue totaling $22.2 billion -- nearly unchanged from the $22.1 billion it posted in the previous fiscal year. Net income improved slightly, from $1.47 billion a year ago to $1.65 billion this past year. It wasn't a bad performance at all, and the company beat expectations for the most recent quarter as adjusted earnings per share (EPS) of $6.07 came in higher than Wall Street estimates of $5.84. The company's cost-cutting efforts have been paying off. But for the current fiscal year, FedEx still doesn't expect to see a lot of growth. It is projecting flat to 2% gain in revenue, as it's still bracing for some challenging economic headwinds. What does this mean for the dividend? FedEx currently pays a quarterly dividend of $1.45, which it recently increased by 5% from the $1.38 it was paying just a few months ago. This means that over the course of a full year, it's paying $5.80 per share to each shareholder. At that rate, the payout looks fairly safe. Consider that in its most recent quarter, its adjusted EPS was already more than this figure. Over the course of a full year, there's little doubt that its earnings will be strong enough to support this level of dividends. FedEx's payout ratio is around 33%, which not only is sustainable, but leaves a lot of room for the company to continue raising its dividend. Unless the company's earnings were to drastically nosedive -- and there's no reason to believe that will happen anytime soon -- there shouldn't be much concern about its dividend today. Should you invest in FedEx stock? FedEx has been struggling to grow in recent years, but that is largely a result of economic challenges, which likely won't persist over the long term. This is still a trusted logistics company that should benefit from continued growth in e-commerce and international trade. It may take some time and patience, but this isn't a stock I'd bet against, as it has a strong brand and vast network, and it's in a good position to benefit from strong economic growth. While its near-term prospects may not look great, this can be a good stock to buy on weakness right now. Although you may be concerned about the 19% drop in value this year (returns as of June 27), the business' fundamentals remain solid, especially as it continues to focus on efficiency and driving costs down. Trading at just 12 times its estimated future earnings, this can be a solid income-generating stock to hang on to for the long haul.