Following a modest first-quarter 2013 earnings,
American Express Co.
), also known as AmEx, announced a 15% hike in its dividend
payout last week. The increase is an attempt to return excess
wealth to investors, thereby raising their confidence in this
Zacks Rank #3 (Hold) stock.
Accordingly, AmEx raised its regular quarterly dividend by 3
cents to 23 cents per share from 20 cents, which is payable on
Aug 9, 2013 to the shareholders of record as on Jul 5, 2013. This
marks the second dividend hike by the company since Nov 2007.
Prior to this, AmEx had increased its dividend by 11% in Mar
2012, after passing the annual capital stress test in the U.S.
with flying colours. In Mar 2013, the company again emerged as
one of potential banking bellwethers to withstand an economic
The ongoing volatile economic environment and intense
competitive pressure restrict AmEx's investment opportunities for
any business expansion. Hence, the board aims to deploy excess
capital to its shareholders through share buybacks and dividend
While AmEx repurchased shares worth $802.5 million in the
first quarter of 2013, it successfully attained the approval from
the Federal Reserve to buy back shares worth $3.2 billion in
2013, followed by another $1.0 billion of share repurchase in the
first quarter of 2014. In Mar 2013, the board of AmEx also
authorized a share repurchase program worth 150 million shares,
thereby replacing the prior one.
The company returned 70% of its capital generated in the first
quarter of 2013, to shareholders via share buybacks and dividend
payouts. On a cumulative basis, AmEx has distributed 66% of
capital generated through dividends and share buybacks since its
inception in Dec 1994.
In Feb 2013, arch rival -
) had declared a 100% hike in quarterly dividend. The
company also sanctioned a new share repurchase program worth $2.0
billion, which has become effective now.
Simultaneously, in the same month, another close peer -
), a Zacks Rank #2 (Buy) stock - sanctioned a new share
repurchase program worth $1.75 billion. In Oct 2012, Visa hiked
its dividend by 50%.
Holding a strong liquidity and healthy capital ratios, we
believe that the recent expansion in AmEx's capital deployment is
also in concurrence with maintaining its market position and
shareholder confidence. Another strong performer in the financial
transaction services sector include
Heartland Payment Systems Inc.
), which carries a Zacks Rank #2 (Buy).
AMER EXPRESS CO (AXP): Free Stock Analysis
HEARTLAND PAYMT (HPY): Free Stock Analysis
MASTERCARD INC (MA): Free Stock Analysis
VISA INC-A (V): Free Stock Analysis Report
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