Why American Express’s Dividend Yield Curve Is Sloping Downwards
Revenue and EPS of American Express
American Express (AXP) posted revenue growth of -2% in 2016 compared to 4% in 2015. Non-interest revenue fell in 2015 offset by interest income. The decline in non-interest revenue came from the ICNS, GCS, and GMS segments and was offset by growth in the USCS segment.
USCS and GCS were the only segments to report growth in interest income. In 2016, the company posted a decline in both non-interest revenue and interest income. ICNS and GCS were the only segments to report growth in non-interest revenue, while GCS was the only segment to report growth in interest income. The company noted revenue growth of -1% in 1H17. This was driven by non-interest revenue growth posted by ICNS and GCS and interest income growth by every segment including flat growth by GMS. The company’s EPS jumped 12% in 2016 after a 9% decline in 2015. The EPS numbers were enhanced by lower expenses and share buybacks. The company posted EPS growth of -21% in 1H17 due to higher expenses offset by share buybacks. The company has maintained a very good annual free cash flow balance.
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American Express’s dividend trajectory
We can see the downward sloping dividend yield curve of American Express between 2016 and 2017 despite the increase in dividend per share. This is due to the rising prices of the company offsetting the impact of the dividend increase. American Express has a dividend yield of 1.5% and YTD price gains of 22.8%. This compares to a dividend yield of 2.3% and YTD price gains of 14.7% by the Dow Jones Industrial Average (DJIA-INDEX) (DIA). The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.4% and YTD price gains of 13.3%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a YTD price gain of 21.4%.
The WisdomTree US LargeCap Dividend ETF (DLN) is a dividend ETF with exposure to American Express. The ETF has a dividend yield of 2.5% and a PE of 20.1x. The WisdomTree US Total Dividend ETF (DTD) is a dividend ETF with exposure to American Express. It has a dividend yield of 2.5% and a PE of 20.5x.