Why You Might Be Interested In American Express Company (NYSE:AXP) For Its Upcoming Dividend
American Express Company AXP | 271.47 271.47 | +1.54% 0.00% Pre |
American Express Company (NYSE:AXP) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase American Express' shares before the 4th of April in order to be eligible for the dividend, which will be paid on the 10th of May.
The company's next dividend payment will be US$0.70 per share, on the back of last year when the company paid a total of US$2.80 to shareholders. Based on the last year's worth of payments, American Express has a trailing yield of 1.2% on the current stock price of US$227.69. If you buy this business for its dividend, you should have an idea of whether American Express's dividend is reliable and sustainable. So we need to investigate whether American Express can afford its dividend, and if the dividend could grow.
View our latest analysis for American Express
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. American Express is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see American Express earnings per share are up 7.6% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, American Express has increased its dividend at approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has American Express got what it takes to maintain its dividend payments? American Express has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. American Express ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in American Express for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with American Express and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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.