#4 Dow Stock: American Express
YTD Gain: 23%
American Express (NYSE:AXP) has had a very good year as financial stocks have gotten some spring back in their steps. But the big banks and American Express have little in common beyond the broad label of “lenders.”
For starters, American Express is more stable. It has a healthier balance sheet by virtue of avoiding the worst of the mortgage mess. As a result, AmEx never has run afoul of the Federal Reserve, with an impressive Tier 1 capital ratio near 11% — in the top three of the entire financial sector, according to Fed “stress tests.” Its dividend never was reduced and was granted an increase to 20 cents a quarter just this March. The Fed also authorized a $5 billion share repurchase program.
American Express does have exposure to consumer debt, and its business arm obviously does better when corporations and small businesses are confident and spending more. But AXP shares have eclipsed 2008 levels and are challenging highs not seen since the market’s peak in 2007. Clearly, investors think the pros outweigh the cons.