American Express (NYSE: AXP) stands out as a compelling dividend stock for long-term investors, even with a modest yield of 1.1%. The company's business model, which includes issuing credit and charge cards, collecting fees, and offering lending services, has shown steady growth. Revenue increased by 9% year over year in its most recent quarter, while billed business rose by 8%. American Express attracts an affluent customer base, providing a buffer against economic downturns through net card fees and recurring revenue.
The company's dividend has nearly tripled since 2016, reflecting its ability to drive shareholder value. Management's prudent approach ensures the company can withstand credit losses during economic downturns, leaving room for further dividend increases. With a price-to-earnings (P/E) multiple of 18.4, American Express is trading below its 10-year average and the S&P 500 average, making it an affordable investment.
However, risks remain, particularly the potential impact of a severe economic downturn, which could lead to higher defaults and slower consumer spending. Despite this, American Express remains a strong candidate for long-term investors seeking steady earnings and dividend growth. Its association with Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) further underscores its appeal as a reliable investment.