Do AmEx Increased Buyback and Coming Dividend Hike Even Matter?

Print Email

If the market does not want to try to chase shares of American Express Co. (NYSE: AXP) higher, perhaps the company can do it all on its own. The credit card issuer has now approved the repurchase of up to 150 million common shares. This is a part of the company’s capital distribution plans that were submitted to the Federal Reserve. The buybacks are also subject to market conditions.

Monday’s change of authorization replaces the prior share repurchase program that had been in place. The company’s previous plan was also for up to 150 million shares of common stock, but American Express only had about 70 million shares of common stock remaining on that previous plan.

We look at the buyback adjustment as good, but note that American Express hit a new 52-week high on Monday as well. At $66.35 now, the new 52-week range is $53.02 to $66.77.

Some investors may be confused about the dividend. When the Federal Reserve approved an increase in the buyback and an increase in the dividend, it was to raise the payout to $0.23 per common share starting in the second quarter. American Express declared a regular quarterly dividend of $0.20 per common share, so this will be the fifth such payment at $0.20 per share. Again, the company did get approval to boost the dividend but apparently that is now a quarter out.

What we are disappointed about here is that American Express will yield only 1.4%, rounded up from 1.2%. For being at the high-end of the consumer, American Express just does not offer a high enough dividend yield. As a reminder, American Express is a longstanding member of the Dow Jones Industrial Average, and this is a low yield when compared to many DJIA stocks.