American Express (AXP), a prominent Dow Jones stock, announced a significant 17% dividend hike alongside an earnings beat for its fourth quarter. Despite these positives, AXP underperformed on Friday, making it the Dow’s worst-performing stock for the day.
Strong Financial Performance in Q4
For the quarter ending December 31, American Express reported an 8.7% year-over-year increase in revenue, totaling $17.2 billion. This growth was driven by a 7.5% rise in card member spending, which reached $408.4 billion. Earnings per share (EPS) also rose 16% year-over-year to $3.04, exceeding Wall Street expectations. Analysts had forecast revenue of $17.16 billion and EPS of $3.03.
CEO Stephen J. Squeri highlighted 2024 as a landmark year for the company, citing record annual revenues, net income, and card member spending. He also noted the addition of 13 million new card accounts and millions of merchant locations worldwide.
Looking ahead to 2025, American Express projects revenue growth between 8% and 10% and EPS ranging from $15.00 to $15.50, reflecting bottom-line growth of 12.4% to 16.1%.
Dividend Hike Reflects Confidence in Long-Term Growth
American Express announced a 17.1% increase to its quarterly dividend, raising it to $0.82 per share starting in Q1 2025. This marks the fourth consecutive year the company has increased its dividend, enhancing returns for shareholders.
Steady dividend growth is a hallmark of high-performing stocks. As noted by Kiplinger, companies that consistently raise dividends often provide superior long-term returns by boosting the yield on the original investment. Over time, even modest initial yields can grow substantially, benefiting long-term investors.
Squeri expressed confidence in the company’s ability to sustain growth, highlighting opportunities within its Millennial and Gen Z customer base, international markets, and its premium clientele.
Is American Express Stock a Buy?
Over the past 12 months, American Express has delivered an impressive total return of nearly 78%, outperforming the S&P 500’s 27.5% gain. However, analysts remain cautious.
According to S&P Global Market Intelligence, the average analyst target price for AXP stock is $304.38, suggesting limited upside from current levels. The consensus recommendation is to hold the stock, though some analysts remain optimistic.
Truist Securities recently initiated a Buy rating on AXP, citing the company’s strong competitive advantages, including its high-end customer base and global reach. Analyst Brian Foran emphasized that these long-term strengths outweigh short-term concerns about sustainable growth. Foran also noted potential for increased spending, particularly in the U.S. commercial sector, which could drive further upside for the stock.
Key Takeaways for Investors
- Dividend Growth: The 17% dividend hike reflects American Express’ confidence in its financial health and long-term prospects.
- Strong Performance: Record-breaking revenues, card member spending, and new card acquisitions underline the company’s growth momentum.
- Mixed Market Sentiment: While some analysts see upside potential, others remain cautious about valuation and growth sustainability.
Conclusion
American Express’ latest dividend increase underscores its commitment to delivering shareholder value while leveraging long-term growth opportunities. Despite mixed analyst sentiment, the company’s strong financial performance, premium customer base, and strategic initiatives position it for continued success.
