We recently analyzed the best dividend stocks of 2024.
Though American Express Company (NYSE:AXP) ranks tenth on our list of the 10 Best Dividend Stocks of 2024, we have analyzed the stock in detail.
We are nearly halfway through the year, and the stock market is showing consistent signs of improvement. The S&P 500 has surged by 12.2% this year so far, with its 12-month return coming in at nearly 27%, as of the close of May 21. However, dividend stocks are still not keeping up with the broader market, with the S&P 500 Dividend Aristocrats Index returning just 3.85% since the start of 2024. Last year also didn’t go well for these equities as tech stocks rose to fame. That said, the tech stocks that drove the market rally, have decided to enhance their shareholder return by initiating dividend policies this year. This could have an impact on the performance of dividend stocks and the overall market. David Harrell, an editor of the Morningstar Dividend Investor newsletter, made the following comment in this regard:
“The inclusion of the big names [Meta, Alphabet] in any sort of dividend indexes or dividend growth indexes is very likely to increase their correlation with the broad market.”
While dividend stocks lagged behind the market last year, their long-term performance suggests otherwise. Dividend equities represented an average of 34% of the market’s overall return from 1940 to 2023. Not only this, these stocks showed resilience and demonstrated strong performance in comparison to other asset classes during periods of high inflation. In our article titled 25 Things Every Dividend Investor Should Know, we cited data from Hartford Funds and mentioned that during eight inflationary periods between 1970 and 2022, dividend stocks outperformed their non-dividend counterparts. Specifically during the 1970s, a decade marked by high inflation, dividends accounted for nearly 73% of the S&P 500’s total return.
In addition to this, the dividend growth rate has also surpassed inflation over the years. According to data from Yale University’s Robert Shiller, dividends per share have grown 1.6 percentage points faster annually than inflation since 1871. This growth advantage has increased in recent decades as over the past 50 years, dividends have surpassed inflation by 2.5 percentage points annually, and in the last two decades, by 4.6 annualized percentage points. This ability of dividends to outpace inflation makes them a more attractive investment for long-term investors. Therefore, analysts suggest that investors should not be concerned about dividend stocks underperforming the broader market in the short term.
Another factor attracting investors to dividend stocks is the increasing amount of dividends US companies have paid over the years. According to recent data from S&P Dow Jones Indices, the S&P 500 companies paid $151.6 billion in dividends in the first quarter of 2024, up from $146.8 billion during the same period last year. The report also mentioned that 796 companies announced dividend hikes during the quarter, amounting to $22.7 billion, growing from $19.7 billion in the prior-year period. This indicates that dividend payments are on the right track this year. Analysts have also given a positive outlook for dividend stocks in 2024. We also published an article on 10 Best Financial Dividend Stocks Insiders are Buying in 2024.
American Express Company (NYSE:AXP)
Year-to-Date Returns as of May 20: 28.67%
American Express Company (NYSE:AXP) is a New York-based bank holding company that offers various financial and banking services to its consumers. On May 7, the company declared a quarterly dividend of $0.70 per share, which was in line with its previous dividend. The company has raised its payouts twice this year. The stock supports a dividend yield of 1.16%, as of May 21. With a year-to-date return of 28.6%, AXP is one of the best dividend stocks of 2024.
At the end of Q4 2023, 64 hedge funds tracked by Insider Monkey held stakes in American Express Company (NYSE:AXP), down from 74 in the previous quarter. The collective value of these stakes is over $31.8 billion. Among these hedge funds, Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q4.
Artisan Partners mentioned American Express Company (NYSE:AXP) in its Q4 2023 investor letter. Here is what the firm has to say:
“Our top performers this quarter were American Express Company (NYSE:AXP), Expedia and Axalta. American Express saw a 26% share price gain. The business has performed well over the past year and over our holding period. While American Express’ long-term growth and attractive business model is well known and understood, the shares had been flat to down for most of the year on fears of a recession. In a recessionary environment, consumer spending slows, which impacts revenue, and credit costs go up as consumers have a harder time paying their bills. As fears about a recession receded in Q4, investors bid up American Express shares.”
American Express Company (NYSE:AXP) is the second best performing financial dividend stock in 2024 and also ranks tenth on our list of the 10 best dividend stocks of 2024. Click to see the other 9 Best Dividend Stocks of 2024.
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Disclosure: None. This article is originally published at Insider Monkey.