Again, it’s not a bad idea for a company to hold into some cash until it’s clear the economy is on firm footing. We’re there, though — American Express (AXP) needs to loosen up on the purse strings. The current AXP dividend yield is a paltry 1.2%, but it’s not like the charge card outfit can’t afford to spread more of the wealth now.
Oh, it hasn’t always been easy to pay its shareholders. In 2009, American Express paid out 72 cents in dividends, which was nearly half of the $1.54 per share it earned that year. In 2010, the company again paid a dividend of 72 cents, out of the $3.35 it earned. AXP maintained that 72-cent dividend in 2011, despite earning $4.09. The company finally upped its dividend in 2012, but only a measly 11% — to 80 cents — even though it booked a profit of $3.89.
Not that the economy is red-hot, but after four solid years of growth and/or reliable strength, it’s pretty clear American Express is doing something right; the need for the safety net is gone. Credit card debt (for better or worse) is nearly at two-year highs, and just 16% below its July 2008 peak when everyone was acting as if cash was flowing like water out of their kitchen faucet. And, the current credit-usage trend might well get us back to those heyday levels within the foreseeable future.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.