American Express (NYSE: AXP) Dividend Analysis

American Express Co. (NYSE: AXP) is not a huge dividend payer, but it does yield 1.5 percent on an annual basis. Does American Express have room to increase their dividend moving forward? How do the financial statements of the company look? What do analysts think of the company right now? Let's take a look at all of these questions as we analyze American Express. First of all, let's take a look at the dividend payout ratio for American Express. I consider any ratio above 60 percent to be at risk, meaning the company may have to cut the dividend payout moving forward. On the other hand, a dividend payout ratio of less than 40% often shows that the company has plenty of room to raise the dividend in the future. American Express currently has a dividend payout ratio of just 21%. On this metric, the company passes with flying colors. There is clearly room for an increase in the dividend payout in the next few years. Founded in 1850, American Express has grown to be one of the biggest brand names in the credit card products industry. American Express now has 61,000 full-time employees stationed all over the world. The next important area to examine is the balance sheet and income statement. Management at American Express has a good track record of making their money go a long way. The company's return on equity currently sits at 26.15 percent, which is one of the best marks in the industry. American Express has operating margins, which in the 19 percent to 20 percent range, which is also a pretty favorable number compared to the financial industry as a whole. The company had less cash than most in the industry a couple of years ago, but in 2010 it boosted its cash position to $17.78 billion. Analysts are slightly optimistic on American Express right now. Of the 23 analysts who have issued a recommendation on the stock, seven rate the company a strong buy and nine rate the company a buy. On the other hand, five analysts give the company a hold rating and two give the company an underperform rating. The analysts' average price target is $52.76, which is 12 percent higher than the closing price on April 21. American Express has only increased their dividend twice in the last six years. The company bumped its quarterly dividend payout from 12 cents to 15 cents in July 2006, and it raised the dividend from 15 cents to 18 cents in January 2008. It is important to note that many financial companies actually lowered their dividend dramatically during the credit crisis, but American Express held their dividend steady during the downturn. American Express appears to be on solid footing as far as its dividend payouts. The company has a solid balance sheet and as the financial sector becomes more stable, I would expect American Express to increase their dividend multiple times in the next five to ten years.... Read more

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