AmEx Sweetens the Deal With a Dividend Hike: Buy, Hold or Sell?

American Express Company AXP, a global integrated payments company, recently announced a 17% increase in its quarterly dividend, raising it by 12 cents to 82 cents per share (or $3.28 annually). The higher dividend will be paid on May 9, 2025, to shareholders of record as of April 4.While this move reflects confidence in AmEx’s cash flow and growth prospects, its current dividend yield of 1.11% remains lower than the Financial – Miscellaneous Services industry average of 1.76%. This could be a drawback for income-focused investors seeking higher yields.Over the past five years, AmEx has increased its dividend three times, signaling a commitment to returning capital to shareholders. This track record suggests the potential for capital appreciation, making investors wonder: Is now the right time to buy AXP stock? Let’s take a closer look.AmEx’s Dividend Growth Image Source: Zacks Investment ResearchAmEx’s Capital ReturnsAmEx has consistently prioritized shareholder returns. In 2022, 2023, and 2024, the company returned $4.9 billion, $5.3 billion, and $7.9 billion, respectively, through dividends and share buybacks. While it paid $2 billion in dividends in 2024, it bought back shares worth $5.9 billion, the total amount coming to 76% of total capital generated. At 2024-end, AmEx had around 75 million shares left in its repurchase program.Can AmEx Keep up the Momentum?By balancing financial discipline, premium offerings and strategic customer engagement, AmEx appears well-equipped to sustain its growth trajectory.As of the fourth quarter, AXP held $40.6 billion in cash and cash equivalents, with a manageable short-term debt of $1.4 billion. Its net debt-to-capital ratio of 11.6% is well below the industry average of 18.9%, giving it strong financial flexibility. While operating cash flow declined from $18.6 billion in 2023 to $14.1 billion in 2024, AmEx’s growth initiatives and efficiency improvements are expected to drive a rebound in the coming quarters.Warren Buffett, known for his long-term investing approach, has held AmEx stock for decades, drawn to its profitable business model, resilience, and adaptability. AmEx benefits from its dual role as both a bank and a credit card network, allowing it to maximize profitability through strong credit performance and operational efficiency. With rising cardmember spending and an expanding lending business, the company remains well-positioned to navigate changing economic conditions.AmEx's success is driven by its loyal customer base, strong card acquisitions, and high retention rates. The company continues to rely on premium clientele as a key revenue driver, particularly through card fees. At the same time, it is expanding its focus on younger generations, targeting Gen Z and Millennials through strategic marketing efforts. While these groups tend to spend less than older customers, AmEx views this as a long-term investment in building brand loyalty and future growth.AmEx’s Earnings Estimates & Surprise HistoryThe Zacks Consensus Estimate for 2025 adjusted earnings for AXP is currently pegged at $15.32 per share, indicating 14.8% year-over-year growth. The consensus mark for 2026 earnings signals further 14.9% growth. The consensus estimate for 2025 and 2026 revenues suggests 8.7% and 8.3% year-over-year increases, respectively.It beat earnings estimates in each of the past four quarters, with an average surprise of 6.9%.American Express Company Price and EPS Surprise American Express Company price-eps-surprise | American Express Company QuoteAmEx’s Price PerformanceIf we look at its past year's price performance, AXP jumped 36.1%, outperforming the industry and the S&P 500 Index. During this time, its peers like Mastercard Incorporated MA and Synchrony Financial SYF have gained 23% and 42%, respectively.1-Year Price Performance – AXP, MA, SYF, Industry & S&P 500 Image Source: Zacks Investment ResearchAmEx’s Valuation Indicates Investor ConfidenceFrom a valuation perspective, American Express is trading at a premium, reflecting strong investor confidence and heightened market optimism about the company's growth prospects within the payments landscape. Going by its price/earnings ratio, the company is trading at forward earnings multiple of 18.81X, higher than the industry average of 14.41X.  Image Source: Zacks Investment ResearchShould You Buy AXP Stock Now?Analysts anticipate increased consumer spending across various sectors, driving higher loan demand and transaction volumes for financial institutions. With its expanding network, American Express is well-positioned to benefit from this trend, making it an appealing option for investors seeking short-term gains.For long-term investors, AmEx’s evolving customer mix is a promising sign. The company's shift into a highly desirable yet accessible status symbol for younger consumers is a compelling long-term growth strategy—one that many competitors are striving to emulate.Technical indicators also signal strength, with AXP trading above its 200-day simple moving average, reinforcing its strong upward momentum. Additionally, the stock remains below Wall Street’s average price target of $322.69, suggesting a potential 7.22% upside from current levels.AXP Wall Street Price Target Image Source: Zacks Investment ResearchWith a blend of value, growth potential and business resilience, AmEx currently presents an attractive investment opportunity. The stock holds a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Mastercard Incorporated (MA): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis Report Synchrony Financial (SYF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks