American Express (AXP) reported good Q2 financial results last week, AXP net income rose 9% and pre-tax income rose 16%. The company has also repurchased nearly $4 billion worth of shares over the past quarters and increased its quarterly dividend from $0.23 to $0.26 earlier this year.
AXP is at an attractive price for the long-term investors to take notice of. Company currently pays a $0.26 quarterly dividend that yields 1.21%. The yield isn’t hold anything special, but it is higher than the dividends of both MasterCard (MA) (0.59%) and Visa (V)(0.77%). And if we look back in past ten years company’s dividend has increased by 147.40%.
Looking at revenue, American express lagged significantly behind both Visa and MasterCard and has shown fairly slow growth over the past month. ASP’s revenue growth last year was 3.33%.
In terms of earnings, AXP’s has seen significantly higher growth over the past five years compared to both MasterCard and Visa. Company’s earnings growth last year was 25.45% and is forecasted at 12.21% this and 10.40% in 2015.
According to CNN Money, American Express has a twelve month upside potential of 31.40% ($113.00) and a downside potential of -8.20% ($79.00), with a median forecast of 16.30% ($100.00). With double digit predicted earnings growth this year and next year, I believe that the stock has a strong chance of outperforming the market in general over the next twelve to twenty four months. American Express currently trades at a trailing PE ratio of 16.44x. Company remains priced significantly lower than its competitor looking at the price to book value of each company, AXP remains the most attractively priced, even though it is nearly at the same level as visa.
American Express has added four additional merchants to its OptBlue program and has entered into a recent partnership with Uber. The Company continues its initiatives toward keeping cost low while increasing the diversity of its funding sources, and progress towards increasing value for merchants and consumers. I believe The Company will continue reward long-term shareholders with both the share price appreciation as well as the dividend growth. As always, I suggest individual investors perform their own research before making any investment decisions.