6.2% yield! Should I buy this FTSE dividend stock for passive income?

Courier International Distribution Services (LSE:IDS) surprised investors in November when it canceled its interim dividend. At FTSE 100 The stock, formerly known as Royal Mail, has long been the go-to stock for UK dividend chasers.

But now that the dust has settled, some investors are buying back businesses for big dividends. City analysts think IDS will still pay a final dividend of 12.5p per share this financial year (to March). This results in the company yielding a forward dividend of 5.6%.

Things look even better for next year. For fiscal 2024, a forecast of 13.9p per share would bring the yield to 6.2%. This is higher than the FTSE index’s forward average of 3.6%.

I’m not sure about the current payout forecast however. The FTSE 100 company is expected to record huge losses in the current financial period. And it doesn’t have a strong balance sheet to help pay good dividends during these tough times. Net debt was £1.5bn in September.

A FTSE stock so not?

In fact, I wouldn’t touch IDS stock with a bargepole. As a long-term investor, I believe the continued growth of e-commerce offers great opportunities for couriers. But this particular operator was fighting too much fire for me.

The business posted an operating loss of £295m in the nine months to December as parcels and mail volumes fell. Demand for these services will remain weak as the UK is also in recession. And the balance sheet must remain under considerable pressure.

Industrial action at Royal Mail also led to IDS’ heavy nine-month loss. Labor strikes cost £200m in losses for the period and, worryingly, the bitter dispute looks set to continue.

This week, the Communications Workers Union announced it will re-elect its members to vote on further measures on pay and conditions. A whopping 97.6% of them voted for industrial action last time the count was held in the summer.

The cost is huge

As I said, the commercial transport sector has a huge opportunity as online shopping becomes more popular. Analysts at ReportLinker believe the global courier, express and parcel market will grow at a compound annual growth rate of 10.3% between 2021 and 2027.

However, the International Distribution System will have to spend money on parcel machines and other hardware to take advantage of this opportunity. This also takes a big bite out of your earnings.

Royal Mail’s capital expenditure in areas such as automation and parcel hubs was £63m in the six months to September. On top of that IDS spends a lot more on its UK division and global unit GLS. Companies must deal with increasing competitive pressures to make these investments count.

On paper, IDS stock looks like a great investment for dividend investors. But I think there are better FTSE 100 income stocks to buy.