Dividend investors tend to focus on yield. But the best long-term dividend stocks are often the ones that can keep raising their payouts at a healthy pace, year after year, without stretching their finances.
That is why integrated payments company American Express (AXP 1.39%) stands out right now. The dividend yield is modest (just under 1%). But the company is growing the payout at a double-digit rate and is still spending far more on share repurchases than dividends.
Combine this capital return profile with a low payout ratio and strong earnings growth, and there's a lot to like about the growth stock. But the big question is whether or not the stock is worth its higher valuation after rising 25% last year. Shares aren't nearly as cheap as they were.
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Room for growth
American Express increased its dividend by 17% last March, reflecting the company's strong underlying business strength. Even with the increase, its dividend yield currently sits at just 0.9%. But investors can take comfort in how well-covered it is. The fact that the company can easily afford its dividend means more big increases are likely in the cards for investors.
Showing how easily it can afford its dividend, American Express's annual dividend payments amount to just 21% of management's expected full-year 2025 earnings per share, which range from $15.20 to $15.50. A payout ratio that low gives management flexibility. It can continue to invest in the business and buy back stock, while still having room to grow the dividend even if business growth slows in the coming years.
Backed by strong business growth
Dividend growth is easiest when earnings are growing. And American Express has been delivering.
Its third-quarter revenue rose 11% year over year to a record $18.4 billion. And net income increased 16% to $2.9 billion. Helped by share repurchases, earnings-per-share growth rose even faster, climbing 19% year over year.
The company's momentum has been particularly strong in recent months.
In its third-quarter earnings release, American Express CEO Stephen Squeri said the company saw spend growth accelerate, and he highlighted that demand for its refreshed U.S. Platinum products exceeded expectations, with new U.S. Platinum account acquisitions doubling versus pre-refresh levels.
Big repurchases
American Express' dividend is nice, but it pales in comparison to the amount of capital the company is returning to shareholders through share repurchases.
In the first nine months of 2025, the company returned $6.1 billion to shareholders, including $4.4 billion of share repurchases and $1.7 billion of dividends. And in the third quarter of 2025 alone, it repurchased 7.3 million shares at an average price of $315.26 -- well below where the stock is trading today.
That pace builds on aggressive repurchases for years. In 2024, American Express returned $7.9 billion to shareholders, with $5.9 billion of that coming from share repurchases (and the remainder from dividends).
NYSE: AXP
Key Data Points
American Express stock: Buy, sell, or hold?
But are shares still worth buying at their current valuation?
The stock currently trades at a price-to-earnings ratio of about 25. This time last year, its multiple was 21 -- more reasonable for a financial company in the business of lending and providing credit. Still, given the company's recent trends of accelerating spend and a successful refresh of its flagship Platinum card in the U.S., I think American Express will likely grow earnings at a double-digit rate again this year.
In other words, I think American Express is worth its premium valuation -- especially for dividend investors. Given the company's strong earnings momentum and low payout ratio, robust dividend growth is likely to persist for years. And investors who buy shares today get access to strong underlying business momentum.
Of course, if the economy contracts or a crisis arises in the financial industry, shares could take a hit. Additionally, the credit card payment space is intensely competitive, so American Express investors will need to keep an eye on the competitive environment. But, even with these risks, I still think shares look attractive for investors willing to hold for the long haul.
