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
-
What You Learn Becoming Your Mother's Financial CaregiverWriter and certified financial planner Beth Pinsker talks to Kiplinger about caring for her mother and her new book.
-
I want to help pay for my grandkids' college. Should I make a lump-sum 529 plan contribution or spread funds out evenly through the years?We asked a college savings professional and a financial planning expert for their advice.
-
Seven Moves for High-Net-Worth People to Make Before End of 2025, From a Financial PlannerIt's time to focus on how they can potentially reduce their taxes, align their finances with family goals and build their financial confidence for the new year.
-
I'm a Financial Planner: These Are the Seven Tiers of Retirement Well-BeingLet's apply Maslow's hierarchy of needs to financial planning to create a guide for ranking financial priorities.
-
Why More Americans Are Redefining Retirement, Just Like I DidRetirement readiness requires more than just money. You have a lot of decisions to make about what kind of life you want to live and how to make it happen.
-
3 Major Changes Investors Must Prepare for in 2026A possible stock market bubble. Trump accounts. Tokenized stocks. These are just three developments investors need to be aware of in the coming months.
-
A Compelling Case for Why Property Investing Reigns Supreme, From a Real Estate Investing ProInvestment data show real estate's superior risk-adjusted returns and unprecedented tax advantages through strategies like 1031 exchanges and opportunity zones.
-
Stocks Close Out Strong Month With Solid Amazon Earnings: Stock Market TodayAmazon lifted its spending forecast as its artificial intelligence (AI) initiatives create "a massive opportunity."
-
Are You Retired? Here's How to Drop the Guilt and Spend Your Nest EggTransitioning from a lifetime of diligent saving to enjoying your wealth in retirement tends to be riddled with guilt, but it doesn't have to be that way.
-
Government Shutdown Freezes National Flood Insurance Program: What Homeowners and Buyers Need to KnowFEMA's National Flood Insurance Program is unavailable for new customers, increased coverage or renewals during the government shutdown.
