In a bid to add shareholder value, the board of directors of American Express Company AXP approved a 10% increase in its quarterly dividend to 43 cents per share. Shareholders of record on Oct 4, 2019 are expected to receive this meatier dividend on Nov 8, 2019.
Investors reacted positively to the news with American Express' share price inching up 1.2% in the past trading session.
In August 2018, the company also hiked its quarterly dividend by 11.4% to 39 cents per share. The company’s track record of disbursing quarterly dividends and raising the payout annually appears impressive to investors. Notably, its dividend trend witnessed a CAGR of 10.7% from 2014 to 2018.
Moreover, the company also agreed to buy back up to 120 million common shares in accordance with its capital plans that are from time to time reviewed and not objected to by the Federal Reserve. This new capital strategy will replace the 41 million shares of common stock left under the prior 2016 authorization, subject to certain conditions.
The dividend raise and share repurchase are supported by the company’s strong capital structure. In 2018, the company returned nearly 41% of the total capital generated via dividend and share repurchases.
We believe, the increase in dividend and share buyback indicate that the company is confident about steady cash flow generation. Maintenance of capital resources at sufficient levels will provide flexibility to cushion future business growth as well as instill investors’ confidence in the stock.
Shares of this Zacks Rank #3 (Hold) company have gained 7.6% in the past year against its industry’s dip of 2.8%.
Stocks to Consider
Investors interested in the same space might take a look at some better-ranked stocks like Fiserv, Inc. FISV, Visa Inc. V and Cardtronics PLC CATM. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fiserv and its units provide financial services technology worldwide. It sports a Zacks Rank #1 and managed to pull off average four-quarter positive surprise of 0.6%.
Visa works as a payments technology company across the globe. It carries a Zacks Rank #2 (Buy) and managed to deliver average positive surprise of 3.4%.
Cardtronics offers automated consumer financial services through its network of automated teller machines and multi-purpose financial services kiosks. The company came up with average four-quarter beat of 37.5% and flaunts a Zacks Rank of 1.
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