Portfolio Update: New Addition (AXP; February 17, 2015)

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On the most recent Stock Watchlist, I mentioned that I was monitoring American Express (AXP) rather closely. When the markets opened this morning, I found that shares of AXP were down yet again, so I used today as an opportunity to initiate a position.

I purchased 70 shares of AXP at $77.50/share.

American Express is an iconic brand name, and one that used to be synonymous with high status in this country. These days, the brand doesn’t carry quite the prestige that it once did, but it is still ubiquitous, and they still do offer some quality products.

AXP simply looks attractive to me at current valuations. P/E is only about 14, and the stock has fallen over 10% in just the last few trading sessions. There are a number of headwinds right now… For starters, American Express plans on cutting 4,000 jobs this year, after reporting higher than expected expenses. Next, AMEX is losing its exclusivity agreement with not only Costco Wholesale (COST) but also JetBlue (JBLU), who is switching over to Barclays and Mastercard (MA).

Over the long-term, if you believe AMEX can fix its problems, then now is perhaps as good an entry point as any. As a dividend stock, AXP still has a ways to go, but has managed to increase the dividends by about 17% over the last five increases. This isn’t up to par with what Visa (V) and MA are doing by any means, but those numbers would be solid for most dividend stocks in other industries. The payout ratio is under 20%, so there’s still a lot of room for future dividend expansion.

Not that it had any bearing on my decision to purchase shares, but as an avid travel hacker, I do find myself swiping my own personal AMEX card very frequently. The Starwood Preferred Guest is my favorite card, and I typically load in excess of $10,000/month on just that one card… And so do a lot of other travel hackers who love to accumulate SPG points! Bluebird is another popular AMEX product among travel hackers. When you mention the fact that AMEX charges some of the highest processing fees in the industry, I’m sure all these accumulative swipes over the years from members of the travel hacking community do add up to quite a noticeable amount!

Lastly, the Oracle of Omaha, Warren Buffett has been a major shareholder of AXP for decades. He currently owns “only” 150 million+ shares, with AXP making up over ~12% of his portfolio. If AXP is good enough for Mr. Buffet, it’s good enough for me! 😉

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My Dividend Pipeline
5 years ago

FI Fighter,

AXP looks like a pretty good contrarian play. The yield certainly leaves a lot to be desired, but I think it’s a solid long term appreciation and dividend growth play.


5 years ago

Must. Train. Myself. To. Delay. Gratification. And. Buy. Evergreen. Stocks. Like. Mr. Buffett.

5 years ago

I think this is a solid buy. V, MA and AXP will all continue making profits as long as people continue using credit cards. Credit cards are not going away anytime soon.

5 years ago

Pay out ratio is fantastic and share buyback has been agressive last 3 years.
The premium (I think) you paid will give fruits soon.

5 years ago

As a Canadian Costco shopper I used to use my Costco Amex all the time but now I can’t use it at Costco and Amex cancelled my card. I wonder what their plan is to recoup all that lost business?


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