Although growth stocks have a place in many portfolios, even young, risk-tolerant investors should own some long-term value stocks. These stocks that you can count on give you the flexibility to invest some of your other funds in higher-risk, higher-growth potential stocks, since they minimize the overall risk of your entire portfolio.
American Express (AXP 0.90%) has been around since 1850 -- that's quite a track record of success. It's a top stock with a differentiated model and long-term growth drivers, and it offers stability for any kind of investor. Here are three reasons to buy it now and hold it for at least five years.
1. The resilient consumer base
American Express has created a brand that targets the affluent consumer, and this customer base is more resilient than the average person. That provides some security for American Express, and it has continued to report healthy, profitable growth despite the inflationary environment. Revenue increased 10% year over year (currency neutral) in 2024, and earnings per share were up 25% to $14.01. CEO Stephen Squeri noted that momentum increased toward the end of the year with a strong holiday season.
Consider that even though American Express has only a fraction of competitor Visa's cards (153 million versus more than 2.9 billion for Visa), it takes in close to double Visa's revenue.
AXP Revenue (TTM) data by YCharts.
Today, it's reaching a younger consumer base. It has gone through an image overhaul and is constantly refreshing its cards and rewards program to appeal to the modern cardmember, and younger members account for more of its spending than any other age group. Management said U.S. fee-based consumer premium cards are the fastest-growing segment in its industry, and that it has 25% of those cards, implying a lot of upside potential. Millennial and Gen Z customers are the fastest-growing age group in these cards, and American Express is adding them at a higher rate than the overall industry.
American Express also acts as its own bank, providing it with diversified revenue streams and a streamlined operational model. Younger customers are driving growth here too, with millennial and Gen Z members accounting for half of the high-yield savings accounts and a third of total balances.
2. The fee-based model
One way American Express stands out is that it charges fees for many of its credit cards. That creates loyalty and a recurring revenue stream, and card fees grow at double-digit rates annually -- 16% in 2024, accounting for nearly 13% of total revenue. About 70% of new card acquisitions were for fee-based cards, and management expects fee growth to stay in the mid- to high teens in 2025. It also has high renewal rates, feeding into this cycle.
NYSE: AXP
Key Data Points
Squeri pointed out that the U.S. consumer gold card, which is its gold-standard and has a $325 annual fee, is resonating with a younger customer base. This membership base will drive future growth for American Express.
3. The dividend
American Express pays a growing dividend that yields just over 1% at the current price, or about its average. The dividend is an important reason that Warren Buffett is such a fan, although he loves the whole package. American Express has paid a dividend since 1989,and it's increased more than 200% over the past 10 years. It just announced a 17% increase, from $0.70 to $0.82. That's an excellent indication of how management feels about the company's position and strength.
American Express is a stock you can buy today and hold for years, benefiting from its role in the economy and passive income.
