American Express Co. (NYSE:AXP) announced its intention to increase quarterly dividend by 9.4% to 35 cents per share, beginning with the third quarter. It also plans to repurchase up to $4.4 billion of common shares during the Comprehensive Capital Analysis and Review (CCAR) approval period from the third quarter of 2017 to the second quarter of 2018. 
Capital One Financial Corporation (COF): Free Stock Analysis Report
American Express Company (AXP): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report
Visa Inc. (V): Free Stock Analysis Report
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Zacks Investment Research
The announcement came on the back of “no-objection” received by the company from the Board of Governors of the Federal Reserve System to its capital plan submitted recently. The plan submission was part of the 2017 CCAR.
Notably, CCAR is a regulatory framework of the Federal Reserve which assesses, regulates and supervises large banks and financial institutions. American Express is subject to this regulatory framework given its huge operations and global presence.
The passage of the capital plan by American Express signifies that the company possesses adequate capital and that its capital structure is stable under various stress-test scenarios. It also implies that planned capital distributions, such as dividends and share repurchases, are viable and acceptable in relation to the regulatory body’s minimum capital requirements.
The news helped the stock to gain 1.07% in the last trading session.
American Express had been in troubled waters with the loss of one of its major client Costco Wholesale Corp. (NASDAQ:COST) to Visa Inc. (NYSE:V) last year which dented in its earnings.
Also, macroeconomic woes induced pains. Currency volatility caused earnings fluctuation and a weak global economy hindered the company’s growth by limiting overall spending by consumers. The price of oil and its downstream impact on airfare and gasoline prices put pressure on charge volume, which compressed the top line.
Nevertheless, American Express has resorted to a number of measures to regain its profitability. These include management reshuffling, simplifying processes across businesses, a reduction in expenses, roll out of new benefits and perks on its credit cards, and increase of marketing spend to win new clients.
These measures have paid off to some extent as evident by a share price increase of 38% in past one year compared with the Zacks categorized Financial-Miscellaneous Services industry’s gain of 30%.
Another company in the same space, Capital One Financial Corporation (NYSE:COF) also received no objection from the Federal Reserve Board for its 2017 capital plan pursuant to CCAR. The company will, however, have to resubmit its capital plan by Dec 28, 2017 to address certain weaknesses in its capital planning process. It expects to repurchase up to $1.85 billion of shares of common stock through the end of the second quarter of 2018 and will maintain its current quarterly dividend of 40 cents per share.
American Express carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Capital One Financial Corporation (COF): Free Stock Analysis Report
American Express Company (AXP): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report
Visa Inc. (V): Free Stock Analysis Report
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Zacks Investment Research