In a bid to boost shareholder value, American Express Company’s AXP Board of Directors recently announced a new buyback plan equipping it to buy back up to 120 million common shares. The new repurchase authorization substitutes the leftover shares of roughly 36 million, which formed a part of the repurchase authorization sanctioned by the Board in 2019.
Concurrent with the new buyback program, management approved a 15% hike in the quarterly dividend. Therefore, the latest payout stands at 60 cents per share compared with the prior payout of 52 cents.
The increased dividend will be paid out on May 10, 2023, to shareholders of record as of Apr 7, 2023. American Express has been a regular dividend-paying company for more than three decades, which is commendable. Based on the stock’s Mar 8 closing price of $174.83, the new dividend will yield 1.2% to the company.
Prior to the recent dividend hike, American Express had sanctioned an increase of roughly 20% in its quarterly dividend in 2022. This significant dividend hike followed two consecutive years of no dividend hikes, probably due to COVID-induced volatilities.
Even though American Express did not resort to dividend hikes amid the pandemic, it still sustained its age-old record of rewarding shareholders even in the dismal period wherein many companies were compelled to cut down their capital deployment activities. AXP returned $9 billion and $2.3 billion in 2021 and 2020, respectively, in the form of share repurchases and dividend payments.
2022 seemed to be another promising year for American Express as well on the capital deployment front. The company bought back 20 million common shares worth $3.3 billion last year. It also paid dividends worth $1.6 billion to shareholders in the same time frame. Together, share repurchases and dividends denoted around 64% of total capital generated in 2022, thereby highlighting AXP’s intensified focus on capital deployment.
A strong financial position equips a company to pursue uninterrupted share buybacks and dividend payments. The same has been the case with American Express, which is backed by a solid cash balance and robust cash generation abilities. As of Dec 31, 2022, AXP’s cash and cash equivalents increased more than four-fold from the 2021-end level. Net cash provided by operating activities surged 43.9% year over year in 2022.
Shares of American Express have gained 18.3% year to date compared with the industry’s 9.2% growth. AXP currently carries a Zacks Rank #3 (Hold).
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Stocks to Consider
Some better-ranked stocks in the Finance space are Merchants Bancorp MBIN, AssetMark Financial Holdings, Inc. AMK and Euronet Worldwide, Inc. EEFT. While Merchants Bancorp sports a Zacks Rank #1 (Strong Buy), AssetMark Financial and Euronet carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of Merchants Bancorp outpaced estimates in three of the last four quarters and matched the mark once, the average being 7.50%. The Zacks Consensus Estimate for MBIN’s 2023 earnings suggests an improvement of 5.8% from the year-ago reported figure. The same for revenues suggests growth of 10.1% from the year-ago actual. The consensus mark for MBIN’s 2023 earnings has moved 10.5% north in the past 60 days.
AssetMark Financial’s earnings outpaced estimates in each of the trailing four quarters, the average being 7.95%. The Zacks Consensus Estimate for AMK’s 2023 earnings suggests an improvement of 24.3% from the year-ago reported figure. The same for revenues suggests growth of 19% from the year-ago actual. The consensus mark for AMK’s 2023 earnings has moved 6.8% north in the past 30 days.
The bottom line of Euronet outpaced estimates in three of the last four quarters and missed the mark once, the average being 7.12%. The Zacks Consensus Estimate for EEFT’s 2023 earnings suggests an improvement of 15.5% from the year-ago reported figure. The same for revenues suggests growth of 9.2% from the year-ago actual. The consensus mark for EEFT’s 2023 earnings has moved 2.5% north in the past 30 days.
Shares of Merchants Bancorp, AssetMark Financial and Euronet have gained 20.4%, 35.9% and 15.1%, respectively, year to date.
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