FedEx's Activist-Backed Changes Help Lift Transportation ETFs | ETF Trends

FedEx Corp. (NYSE: FDX) climbed Tuesday, lifting transportation sector-related exchange traded funds after the company raised its dividends and added new board members under the pressure from activist investor D.E. Shaw Group.

The iShares Transportation Average ETF (IYT) rose 1.0% on Tuesday.

Meanwhile, FedEx shares gained 14.4%, testing its long-term resistance at the 200-day simple moving average. FDX makes up 4.3% of IYT’s underlying portfolio.

On Tuesday, FedEx stated that it will hike its quarterly dividend by 53% to $1.15 per share, the Wall Street Journal reported. Furthermore, the company will be adjusting its executive-compensation plan so that cash bonus payments will be based on the company’s overall shareholder return.

The changes come after discussions with D.E. Shaw, according to people familiar with the matter. D.E. Shaw is a hedge fund with an activist tendency, pressing for changes at many American corporate giants like Exxon Mobil Corp.

“Investors have been speculating about an activist at FDX for years, without one materializing,” Jack Atkins, an analyst with Stephens with an “overweight” rating on the stock, wrote in a note to clients, according to Bloomberg. “Now, with a new leadership team and fresh voices on the board (including a proven operator like Mr. Vena), we are hopeful that a new day is dawning.”

Michael O’Mary, managing director at D.E. Shaw, argued that the new additions to the company’s board and changes to the compensation plan will help incentivize FedEx to boost shareholder returns.

“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,” new chief executive officer Raj Subramaniam said in a statement.

FedEx finance chief Michael Lenz also stated that the dividend increase reflects the company’s ongoing confidence in its business outlook.

The company is slated to report its latest results next week.

“We look forward to sharing more detail on our strategy and long-term objectives at our investor day later this month,” Michael Lenz said in a statement.

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