American Express (AXP) is the worst Dow Jones stock Friday even after the credit card giant beat top- and bottom-line expectations for its fourth quarter and announced a dividend hike.
In the three months ending December 31, American Express said its revenue increased 8.7% year over year to $17.2 billion, boosted by card member spending that was up 7.5% to $408.4 billion. Its earnings per share (EPS) rose 16% from the year-ago period to $3.04.
"2024 was another strong year for American Express," said American Express CEO Stephen J. Squeri in a statement. In addition to record annual revenues and net income, the company also "saw record levels of annual Card Member spending, record net card fee revenues, and a record 13 million new card acquisitions, and we continued to add millions of merchant locations to our network globally," he added.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
American Express' results beat analysts' expectations. Specifically, Wall Street was calling for revenue of $17.16 billion and earnings of $3.03 per share, according to Barron's.
For its new fiscal year, American Express expects to achieve revenue growth in the range of 8% to 10% and earnings of $15.00 to $15.50 per share. This represents year-over-year bottom-line growth of 12.4% to 16.1%.
American Express hikes its dividend
American Express also announced a 17.1% increase to its dividend. The company's new quarterly dividend rate is 82 cents per share, beginning in the first quarter of 2025.
This marks the fourth straight year AXP has hiked its dividend, which can boost its overall return. "Shares in companies that raise their payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with," writes Dan Burrows, senior investing writer at Kiplinger, in his feature "Best Dividend Stocks to Buy for Dependable Dividend Growth."
This is because steady dividend hikes "lift the yield on an investor's original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day," he adds.
"I am confident that we can sustain our strong momentum over the long term, driven by the many attractive opportunities we see across our premium customer base, particularly with Millennial and Gen Z consumers and in key international markets, along with our operating expense leverage which enables us to continue investing at high levels to drive growth," Squeri said.
Is AXP stock a buy, sell or hold?
American Express has put in a tremendous performance on the price charts over the past 12 months, up nearly 78% on a total return basis vs the S&P 500's 27.5% gain. Yet, Wall Street is on the sidelines when it comes to the Warren Buffett stock.
According to S&P Global Market Intelligence, the average analyst target price for AXP stock is $304.38, representing a discount to current levels. Meanwhile, the consensus recommendation is a Hold.
But there are some bulls to be found. Financial services firm Truist Securities, for one, recently initiated coverage on the financial stock with a Buy rating.
"There are competitive moats and long-term tailwinds for the company – such as a loyal high-end customer base and international reach – that we believe outweigh some of the more recent questions that have started rising around sustainable growth," writes Truist Securities analyst Brian Foran.
And while AXP is pricey at current leves, Foran believes "there is additional upside to the stock as spend growth comes back especially on the U.S. commercial side."
Related Content
-
I’m Over 65 and Itemize: Can I Claim the New $6,000 ‘Senior Bonus’ Tax Deduction?Tax Changes If you’re an older adult, a new bonus deduction could provide a valuable tax benefit.
-
Alphabet Stock Pops After Google Antitrust Ruling: What to KnowGOOGL stock is soaring Wednesday after a judge ruled that Alphabet does not have to divest its Chrome browser.
-
Alphabet Stock Pops After Google Antitrust Ruling: What to Know
GOOGL stock is soaring Wednesday after a judge ruled that Alphabet does not have to divest its Chrome browser.
-
7 Mistakes to Avoid When You First Start InvestingInvesting brings the opportunity to build wealth, but there are plenty of mistakes that can be made. Here are seven common ones and how they can be avoided.
-
A Fidelity Fund Misses Out on Soaring Bank StocksThe Fidelity International Growth Fund has outperformed over the long term, but its lagging exposure to bank stocks has weighed on more recent returns.
-
More Than Money: The Hidden Toll of Financial Abuse of Older AdultsFinancial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your DollarsThe world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
Stocks Slide to Start September: Stock Market TodaySeasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
Where is the Foreign Dividend Boom Headed?It's been a golden six months for foreign dividend stocks, but can any be relied on for predictable income going forward? Here are some options.
