American Express' (NYSE:AXP) Dividend Will Be Increased To $0.70
The board of American Express Company (NYSE:AXP) has announced that it will be paying its dividend of $0.70 on the 10th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
Check out our latest analysis for American Express
American Express' Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, American Express' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 50.4% over the next year. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.
American Express Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $2.80. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
American Express Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. American Express has seen EPS rising for the last five years, at 7.6% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for American Express' prospects of growing its dividend payments in the future.
We Really Like American Express' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for American Express that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
