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Can American Express Distributions Continue to Attract Investors?


Dec. 4 2020, Updated 10:42 a.m. ET

Rising distributions

American Express (or Amex) (AXP) has been using its strong balance sheet position to consistently declare dividends for its shareholders. The company’s performance has been quite volatile since its Costco (COST) break-up compared to its major rivals such as MasterCard (MA) and Visa (V). Beating analyst estimates for EPS (earnings per share) in 1Q17 indicates a recovery helped by new partnerships and a higher penetration in the global markets.

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In 1Q17, Amex declared a dividend of $0.32 per common share, a rise of 10.0% on a YoY (year-over-year) basis. Although investors are worried about the company’s fundamental business, Amex is expected to declare a dividend of $1.33 per common share in 2017. It has also seen improved performance through its core services. Amex’s total loan growth has seen a rise of 11.0% YoY, and most of the rise came from existing customers.

Performance in 1Q17

In 1Q17, Amex returned $1.1 billion in the form of share repurchases and dividends. Dividends amounted to $0.30 billion, and the balance, or $0.80 billion, relates to share repurchases. In 1Q17, Amex repurchased 11.0 million common shares with an average price of $77.93 per share. The company’s payout ratio was 91.0% in the form of dividends and repurchases. Amex’s dividend yield stands at ~1.6%. Its commercial peers (XLF) have the following dividend yields:

  • MasterCard (MA): 0.72%
  • Visa (V): 0.69%
  • Discover Financial Services (DFS): ~2.0%

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