American Express Hikes Dividend, Delivers On Its Commitment

American Express Co. (NYSE:AXP) has approved a 9% hike in its quarterly dividend to 35 cents per share. This increased dividend will be paid on Nov 10, 2017 to its shareholders of record on Oct 6, 2017.

The announcement is in sync with American Express' capital plan submitted to the Federal Reserve as a part of the 2017 Comprehensive Capital Analysis and Review (“CCAR”). The plan was to return up to $4.4 billion in the form of dividends and share repurchases over the next four quarters.

CCAR is a framework by the Federal Reserve that assesses, regulates and supervises large banks and financial institutions. Other card issuers Capital One Financial Corporation (NYSE:COF) and Discover Financial Services (NYSE:DFS) also underwent CCAR and received non-objection from the Federal Reserve with respect to their proposed capital actions.

The capital plan by American Express was passed by the government, signifying that the company possesses adequate capital and that its capital structure is stable under various stress-test scenarios. It also implies that planned capital distribution, in the form of dividends and share repurchases, is viable and acceptable in relation to the regulatory body’s minimum capital requirements.

With this announcement, American Express has delivered on its promise and brought some relief to its investors, who were otherwise pessimistic over the stock that is caught in a web of trouble.

In 2016, the company increased its quarterly dividend by 10% to 32 cents per share, after approval from the Federal Reserve.

The most recent dividend hike is the fifth by the company since Nov 2007. While maintaining healthy capital ratios, management aims to pay out more than 50% to its investors through dividends and share buybacks.

The recent divided hike signifies its sound balance sheet position had cements investors’ confidence in the stock. Also, steps taken toward accelerating revenue growth, optimizing investments and resetting the cost base have yielded results. Year to date, the stocks has gained 21.7% compared with the growth of 10.5% registered by the industry it belongs to.

Currently, AmEx carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Euronet Worldwide, Inc. (NASDAQ:EEFT) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Euronet Worldwide beat estimates in two of the four reported quarters, with an average positive surprise of 0.42%.

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