Buffett favorite American Express (AXP) had a great 2021, yet the company shrank during that year. For example, Amex’s quarterly gross profit grew from $9.351 billion on 31 December 2020 to $12.145 billion on 31 December 2021.
Similarly, American Express’s quarterly operating income grew from $1.858 billion to $2.306 billion in the same period. Moreover, Amex’s quarterly revenues grew from $9.741 billion on 31 December 2020 to $1.437 billion on 31 December 2021.
In contrast, American Express’s value shrank in 2021. To explain, American Express Corp’s (NYSE: AXP) total assets shrank from $191.367 billion on 31 December 2020 to $189 billion on 31 December 2021. Similarly, American Express’s cash and short-term investments shrank from $32.965 billion on 31 December 2020 to $22 billion on 31 December 2021.
How Much Cash did American Express Generate in 2021?
Amex (AXP) did not report cash flow numbers for 31 December 2021. However, American Express reported two quarters of negative quarterly ending cash flow in 2021.
For example, American Express reported a -$9.484 billion quarterly ending cash flow on 30 June 2021. The number rose to -$2.88 billion on 30 September 2021.
However, American Express can generate enormous amounts of cash. For instance, it reported a quarterly ending cash flow of $40.28 billion on 31 March 2021.
In contrast, American Express reported three quarters of rising quarterly operating cash flow. For instance, there was a $2.28 billion quarterly cash flow on 31 March 2021 that rose to $3.185 billion on 30 June 2021 and $4.172 billion on 30 September 2021. Hence, American Express finished 2021 with rising cash flow.
Moreover, American Express finished 2021 with less debt. The total debt fell from $43.597 billion on 31 December 2020 to $41 billion on 31 December 2021.
Is American Express a value investment?
American Express (AXP) retains some value characteristics. For example, it generates enormous amounts of cash.
However, the value is shrinking while the stock price is rising. For example, Mr. Market paid $120.70 for Amex on 2 February 2021 and $185.85 on 4 February 2022. Hence, many people will wonder whether Mr. Market overprices American Express.
American Express is still a Warren Buffett favorite. For example, Berkshire Hathaway (NYSE: BRK.B) owned 151.6 million shares of AXP on 30 September 2021, Investor’s Business Daily estimates.
American Express’s Enormous Payments Platform
American Express still operates an enormous payments platform. For example there were 58.2 million international Amex cards and 53.8 million US American Express cards in 2020, Statista estimates.
Fortunately, for American Express, Americans are still credit card addicts. For example, total US consumer credit card balances rose from $787 billion in the second quarter of 2021 to $800 billion in the third quarter of 2021, the Federal Reserve Bank of New York estimates.
However, consumer credit card balances are still below the pre-pandemic $927 billion reported in the fourth quarter of 2019. Hence, credit card balances were $123 billion lower than in 2019.
In contrast, total US household debt rose to over $15 trillion in the third quarter of 2021, The Center for Microeconomic Data estimates. In detail, American households had $4.25 trillion in non-housing debt and $10.99 trillion in housing debt in the third quarter of 2021.
Thus, Americans still use plastic to pay which is good for American Express.
Is American Express a Nice Dividend Stock?
I think American Express (AXP) is still a respectable dividend stock. For example, American Express will pay two 43₵ quarterly dividends in 2021. Overall, Amex offered a $1.72 forward dividend and a 0.92% forward dividend yield on 4 February 2022.
If you are seeking a value investment that pays an excellent dividend, I think American Express is still a good choice. However, I think Mr. Market overprices AXP now. Thus I consider American Express a stock to watch until its share price falls.
However, I think imitating Buffett and holding American Express is still a good strategy. I believe the financial numbers show Warren Buffett is still right about American Express after all these years.