Now that there are only a few weeks left in 2012, this is a good time for investors to look at the stocks they own and evaluate whether their performance has met previously set expectations. While year-to-date returns are obviously something investors will look at, big structural changes to the company, positive and negative news stories, and an understanding of how your holding has done compared with the company's peers are all areas you should should consider when determining whether the company deserves to remain a part of your portfolio.
So today, let's examine how 2012 treated American Express (NYSE:AXP).
Year to date, American Express' stock price has risen by 20.5%, while over that same time frame, the Dow Jones Industrial Average (DJINDICES:^DJI) is up a modest 7.69%. The stock's 52-week range is $45.89-$61.42, and with the current price at $56.83, it's trading at the higher end of the one-year rolling time period. The price-to-earnings ratio is 13.36, which is lower than the current P/E ratio of 15.84 for the S&P 500 (SNPINDEX:^GSPC).
Additionally, the company's current dividend yield is 1.4%, and back in March, American Express raised its dividend by 11%, which was the first increase investors saw in nearly five years.
When it comes to the credit card industry, new product launches are few and far between. But this year, American Express made headlines and shocked longtime followers when the company announced that it was getting into the prepaid debit-card business. The launch of BlueBird makes sense from a business aspect, but it may slightly hurt the company's image in the long run.
American Express has traditionally been known for providing credit cards to high-credit-worthy individuals who typically earn an average income above $100,000 a year. The card was seen as somewhat of a status symbol, since not everyone could get one. In contrast, competitors such as Visa (NYSE:V) and MasterCard (NYSE:MA) traditionally have lower requirements to become a cardholder. The new BlueBird card will now open the company up to a wider range of consumers and hopefully attract more customers.
While some believe that the no-fee card may someday have a monthly or yearly charge associated with using it, it currently doesn't cost the user anything to have one. Therefore, American Express is only making money on the BlueBird program the same way it makes money from traditional credit cards -- through swipe fees, which credit card companies charge a retailer when one of their cards is used to purchase merchandise.
The upside of the BlueBird program could be huge, now that the number of possible cards out in the market ringing up swipe fees is nearly every human walking the earth. At the same time, though, the downside is very limited, because American Express isn't lending to non-creditworthy consumers. But as I mentioned before, the idea that an American Express card is no longer only available to a select few may degrade the status symbol persona the company has had in the past.
Compared with its peers in the credit card business, American Express' stock hasn't performed all that well. Visa is up 42.3% year to date, while MasterCard is up 28%, and as I mentioned, American Express is up only 20%. The sometimes forgotten little brother in the credit card industry, Discover Financial Services (NYSE:DFS), actually beat everyone this year and is up 65.89% over the same time frame.
Even without American Express' dividend increase this year, the company easily beats its competitors on a yield basis, where it boasts a dividend yield of 1.4%, while Discover comes in second with a 1% yield and just slightly beats Visa's 0.9% yield. Trailing by a long shot, MasterCard's 0.2% yield is not really even in the running.
Discover and American Express are nearly even when it comes to their P/E ratios, which come in at of 9.31 and 13.36, respectively, even after each stock has experienced such large share-price run-ups this year. On the other side of the spectrum are Visa and MasterCard, which have P/Es of 46.7 and 28.36, respectively. One reason there's such a large difference between the four companies is that Visa and MasterCard are still seen as growth companies, while Discover and American Express aren't believed to have as much upside to their stocks.
That's American Express' 2012 in a nutshell. Check back on Dec. 31 to find out what the company has in store for shareholders in 2013 and whether you should add American Express to your portfolio in the New Year.
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Fool contributor Matt Thalman has no positions in the stocks mentioned above. The Motley Fool owns shares of MasterCard. Motley Fool newsletter services recommend American Express and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.