Will American Express Company (AXP) Hike Its Dividend? – Capital One Financial Corp. (COF), The Bank of New York Mellon Corporation (BK)

Stress-test results have been saturating the media this week as the big banks show off their hearty capital reserves and ability to withstand an economic pseudo-armageddon. Though this was the third annual test, the Fed added some of Dodd-Frank’s regulations into the mix, prompting the announcement of the first phase, the stress test, on March 7 — to be followed by the Comprehensive Capital Analysis and Review results this Thursday.

American Express Company (NYSE:AXP)Although banks — particularly big banks — have been the focus of media attention, any entity considered a bank holding company is subject to this yearly scrutiny. Two institutions that fit this description are Capital One Financial Corp. (NYSE:COF) and American Express (NYSE:AXP) , though both are often thought of as primarily credit card issuers. Both of these companies passed the recent stress test easily, though American Express bested Capital One Financial Corp. (NYSE:COF)’s 7.4% projected minimum Tier 1 common ratio with an 11.1% post-severely adverse-scenario capital cushion.

Source: Dodd-Frank Act Stress Test 2013: Supervisory Stress Test Methodology and Results.

Should American Express ask for a dividend increase or share buyback?
With such an impressive showing on the stress test, it seems almost certain that American Express will request — and will be allowed to bestow — a larger dividend, as well as institute a share buyback program. Indeed, only the two large custody banks, The Bank of New York Mellon Corporation (NYSE:BK) and State Street Corporation (NYSE:STT) had higher common ratios than American Express. Considering that big regional bank BB&T Corporation (NYSE:BBT) , which analysts had pegged as one of the more highly capitalized institutions, scored a 9.4% ratio, AmEx’s results are all the more impressive.

Following the stress test last year, AmEx embarked upon a share repurchase program to the tune of $4 billion in 2012, reserving another $1 billion in buybacks for the current quarter. The company also announced a boost in the quarterly dividend to $0.20 from $0.18 per share.

How much will AmEx share with investors?
Will American Express be a little more generous this year? It certainly seems like it could afford to be. The company has many irons in the fire, and has recently begun exploring the social media side of credit card purchasing through a new deal with Twitter. As Fool analyst Dan Caplinger has noted, the company could easily bump up that payout quite a bit without feeling a pinch.

Certainly, with such a stellar financial checkup under its belt, AmEx could afford to be magnanimous with its investors — provided it stays under the Fed’s comfort level of less than 30% of estimated after-tax net income. Soon, we’ll know just how benevolent they plan to be.

The article Will American Express Hike Its Dividend? originally appeared on Fool.com and is written by Amanda Alix

Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends American Express.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!