Warren Buffett and Berkshire Hathaway (NYSE: BRK.A, BRK.B) are set to benefit from a sizable increase in dividend income following American Express (NYSE: AXP) announcing a 17% dividend hike.
The financial services giant, Berkshire’s second-largest holding, raised its quarterly dividend from $0.70 per share to $0.82, representing another milestone for one of Buffett’s long-term favorite stocks.
For Berkshire Hathaway, this dividend bump translates into an impressive $124.3 million quarterly payout, up from the $106.1 million it would have previously received.
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AXP’s market performance and earnings momentum
American Express stock has been on a tear, trading at $325.87, with gains of 4.25% over the past five days, 7.38% for the month, and a staggering 75.37% increase over the past year. Year-to-date, AXP has already climbed 9.19%,reflecting the market’s confidence in its financial strength and growth trajectory.
The company’s Q4 2024 earnings further justify investor optimism. Adjusted earnings per share (EPS) rose 16% year-over-year, coming in at $3.04, slightly surpassing the consensus estimate of $3.03. Revenues also posted a solid 9% year-over-year growth, reaching $17.2 billion, in line with analysts’ expectations. A strong holiday season, coupled with falling interest rates, supported robust spending volumes, helping AmEx deliver a strong finish to the year.
Looking ahead, American Express anticipates fiscal year 2025 earnings to fall within the range of $15 to $15.50 per share, exceeding Wall Street’s prior expectation of $15.23 per share. This upbeat guidance reflects management’s confidence in the company’s ability to maintain strong spending growth and capitalize on improving macroeconomic conditions.
The Buffett effect
Buffett’s investment in American Express, a relationship spanning nearly three decades, epitomizes his “buy-and-hold” philosophy. With Berkshire Hathaway owning approximately 151.6 million shares of AXP, valued at over $49 billion, the dividend hike underscores the benefits of holding businesses capable of consistently increasing shareholder returns.
Buffett has long praised American Express for its iconic brand, high barriers to entry, and lucrative fee-based business model, all of which contribute to its strong financial performance and ability to generate robust free cash flow. The latest dividend increase reinforces AXP’s appeal as a core holding within Berkshire’s portfolio.
American Express’s dividend growth comes on the back of favorable trends, including a resilient consumer environment and rising transaction volumes. As interest rates stabilize and economic uncertainties subside, the company appears well-positioned to sustain its momentum.
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