American Express Company (NYSE:AXP) stands out in the payments world. While Visa and Mastercard mostly run the payment rails, American Express does it all: it operates the network, issues the cards, and handles the lending. That setup gives Amex more control over its customer relationships and lets it generate revenue from card fees, merchant transactions, and interest on balances.
A big part of what makes American Express appealing is its premium approach. Those annual card fees bring in steady revenue, and perks like travel, dining, and lifestyle benefits keep cardholders coming back. This model also opens up chances for Amex to offer even more products to its loyal customers. Though AXP is popular among investors, there are some overlooked stocks that could offer a different balance of income and upside. Check our 52-week low dividend stocks list here.
The latest quarterly results show this strategy is working. In the second quarter of 2026, Amex reported $19.6 billion in revenue, up 10% from a year earlier. Cardmember spending climbed 9%, and diluted earnings per share rose 11% to $4.53. Net income hit $3.1 billion. Management even raised its full-year revenue growth forecast to 10%, keeping EPS guidance steady at $17.30 to $17.90.
But it’s not just about big numbers; it’s the quality of the growth that counts. Amex does well when people spend more, but its lending side means it’s exposed to rising defaults. Plus, generous rewards, marketing, and rising funding costs can eat into profits. That’s why the company’s value depends on keeping customers loyal while staying smart about who it lends to.
Find AXP among 10 Best Stocks to Buy According to Billionaire Mario Gabelli’s Fund
The Dividend Is a Growth Strategy, Not an Income Proposition
American Express raised its dividend by a healthy 16% in March 2026, increasing the quarterly payout from $0.82 to $0.95 per share. That’s $3.80 a year. Still, with a forward yield of just 1.21%, this isn’t really a stock for investors chasing high income right now.
The real story, though, is how easily that dividend is covered. With a payout ratio of just 21.5%, American Express Company keeps plenty of earnings free for reinvesting in the business, making acquisitions, or buying back shares. That flexibility means there’s room for more dividend hikes down the road, without forcing management to stretch.
Of course, the dividend is only as safe as the earnings backing it up. If credit losses pile up or consumers pull back on spending, future dividend growth could slow, even if an actual cut is unlikely. For investors, it’s smart to think of the dividend as just one part of the total return story, alongside earnings growth and share price moves. Those weighing a modest-yield growth stock against other income opportunities may find it useful to compare the fundamentals of dividend companies that are at their 52-week lows before deciding where their money could work hardest.
Valuation Must Justify the Equity Risk
Right now, Amex trades at 15.06 times forward earnings, compared to a trailing P/E of 18.32. That gap means investors expect earnings to rise, but there are no guarantees. Based on that forward P/E, the implied earnings yield is about 6.6%. For context, the 10-year U.S. Treasury was yielding around 5.1% in mid-October 2026. That leaves a gap of about 1.5 percentage points between the two.
That is just a starting point for thinking about risk and return, not a guarantee that the stock is undervalued. Shareholders only get what’s left after expenses, credit losses, and other costs, and those earnings can fall during tough times. Treasury bonds, on the other hand, don’t come with those business risks.
Amex probably deserves to trade at a bit of a premium, thanks to its strong brand, steady card fees, and its knack for growing earnings while returning capital to shareholders. But because it runs a lending business, it’s exposed to more risk than pure payment networks. That’s an important difference investors should keep in mind when thinking about valuation.
Also read: American Express (AXP): Double-Digit Growth at a Below-Average Multiple
Bottom line
American Express Company looks like it has a sustainable dividend and a business built for long-term growth. Trading at 15.06 times forward earnings, the stock could be a good value if management hits its earnings targets and keeps profits growing. But with only a modest yield advantage over Treasuries, investors need to really believe in that future growth. The dividend helps, but it’s the company’s ability to lift earnings over time that will ultimately make or break the investment case.
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This article is originally published at Insider Monkey.
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