The integrated payments company is pairing fast dividend growth with aggressive buybacks. But is the stock still a smart long-term buy after a big run-up?
Dividend investors generally prioritize yield. However, the most promising long-term dividend stocks are typically those that can consistently increase their payouts at a healthy pace, year after year, without jeopardizing their financial stability.
This is precisely why the integrated payments company American Express (AXP +0.97%) is capturing attention. Although the dividend yield is relatively modest (just under 1%), the company is successfully increasing its payouts at a remarkable double-digit rate while also allocating substantial funds toward share repurchases rather than solely dividends.
When you combine this impressive capital return profile with a low payout ratio and robust earnings growth, there is a lot to appreciate about this growth stock. Yet, the critical question remains: is the stock priced appropriately after its 25% increase last year? Currently, shares are not as inexpensive as they once were.
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Exploring American Express’ Growth Potential
In March, American Express surprised investors by increasing its dividend by a remarkable 17%, showcasing the company’s robust underlying business strength. Currently, even after this significant increase, its dividend yield remains at a modest 0.9%. However, investors can find reassurance in how well-covered this yield is. The company’s ability to easily afford its dividend suggests that even greater increases could be on the horizon for dedicated shareholders.
To illustrate this financial stability, American Express’s annual dividend payments represent only 21% of management’s projected full-year 2025 earnings per share, expected to range between $15.20 and $15.50. This impressively low payout ratio provides management with essential flexibility. It allows the company to continue reinvesting in its operations and executing share buybacks, while simultaneously maintaining potential for future dividend growth, even if business expansion decelerates in the years to come.
Strong Earnings Fueling Dividend Growth
When it comes to dividend growth, the easiest path is paved with rising earnings. American Express has been demonstrating remarkable performance in this area.
For instance, its revenue for the third quarter surged by 11% year over year, reaching an impressive record of $18.4 billion. Furthermore, net income soared by 16%, totaling $2.9 billion. Thanks to aggressive share repurchases, growth in earnings per share accelerated even further, jumping by 19% year over year.
The momentum for the company has remained particularly strong in recent months, further enhancing its appeal.
In the third-quarter earnings announcement, American Express CEO Stephen Squeri highlighted that the company experienced an acceleration in spend growth. He pointed out that demand for the newly refreshed U.S. Platinum products exceeded expectations, with new account acquisitions doubling compared to pre-refresh levels, showcasing the brand’s revitalized appeal.
Share Repurchases Outpacing Dividends
While American Express offers an attractive dividend, it pales in comparison to the substantial amount of capital the company is returning to its shareholders through aggressive share repurchases.
In the first nine months of 2025, the company returned an impressive $6.1 billion to shareholders. This included .4 billion in share repurchases and $1.7 billion in dividends. Notably, during the third quarter of 2025, the company repurchased 7.3 million shares at an average price of $315.26, which is significantly lower than the current trading price of the stock.
This pace of repurchases continues a trend of aggressive buybacks over recent years. In 2024 alone, American Express returned $7.9 billion to shareholders, with $5.9 billion derived from share repurchases and the remainder from dividends, indicating a strong commitment to returning value to investors.
Today’s Change
(0.97%) $3.60
Current Price
$372.73
Key Data Points
Market Cap
$257B
Day’s Range
$367.25 – $372.87
52wk Range
$220.43 – $387.49
Volume
2.1M
Avg Vol
2.5M
Gross Margin
61.04%
Dividend Yield
1.07%
Evaluating American Express Stock: Should You Buy, Sell, or Hold?
Are shares still a worthwhile investment at their current valuation?
The stock currently trades at a price-to-earnings ratio of approximately 25. In contrast, last year at this time, its multiple was around 21, which appeared more reasonable for a financial company involved in lending and credit provision. Yet, considering the company’s recent trends of increasing spend and the successful relaunch of its flagship Platinum card in the United States, I believe American Express is on track to achieve double-digit earnings growth again this year.
In essence, I contend that American Express justifies its premium valuation, particularly for dividend investors. With the company’s strong earnings momentum and low payout ratio, robust dividend growth is likely to continue for many years. Investors who choose to acquire shares today will benefit from the solid underlying business momentum.
However, potential risks remain. If the economy contracts or if a financial crisis unfolds, shares could face downward pressure. Moreover, the credit card payment industry is highly competitive, so American Express investors must stay vigilant regarding the competitive landscape. Yet, despite these risks, I firmly believe that shares are appealing for long-term investors who are prepared to hold their position.
