Meet the Dow Jones Dividend Stock That's on Pace to Beat the S&P 500 for the Fifth Consecutive Year. Here's Why It's Still a Buy Now.

Key Points

• American Express is on track to deliver a higher total return than the S&P 500 for the fifth consecutive year.

• Its business model is distinctly different than Visa and Mastercard.

• American Express caters to affluent consumers, making it well positioned to endure an economic slowdown.

• 10 stocks we like better than American Express ›

The S&P 500 (SNPINDEX: ^GSPC) has doubled over the last five years largely thanks to mega-cap tech stocks like the "Ten Titans." Many value-focused companies that distribute a significant portion of their profits to shareholders through dividends have underperformed the index during this period of dominance for tech stocks. But not Dow Jones Industrial Average (DJINDICES: ^DJI) component American Express (NYSE: AXP).

The financial services giant produced a 269% total return in the last five years and is on track to beat the S&P 500 for the fifth consecutive year in 2025.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Here's why American Express continues to thrive in a growth stock-dominated market, and why it could still be a buy now, even at an all-time high.

Image source: Getty Images.

American Express is in a league of its own

American Express acts as a payment processor and a bank by issuing cards and managing the risk associated with customers paying off their balances. Whereas Visa (NYSE: V) and Mastercard (NYSE: MA) serve only as the payment processor, passing the risk along to affiliated banks such as JPMorgan Chase and Citigroup. Visa and Mastercard's simplicity and capital-light business models yield far higher operating margins than American Express. But American Express has demonstrated that its approach offers significantly more upside potential and faster growth.

Top-tier American Express cards come with relatively expensive annual fees, but also some generous perks. American Express attracts affluent customers who are highly likely to manage their spending well. Perks incentivize customers to use their cards for as many purchases as possible. The perks come at a cost, as American Express's member rewards expenses are roughly double the fees it collects from memberships. But it's worth it because American Express makes so much in discount revenue (merchant fees). It tends to charge higher fees to merchants than Visa and Mastercard to help offset the losses incurred on membership rewards.

American Express has expanded its network, making it more attractive for merchants to accept its cards, even if they have to pay higher fees. The result is a snowball effect, where existing customers use their American Express cards more frequently, and prospective customers may make the decision to sign up for a card due to the perks and its widespread acceptance.

Thriving throughout the business cycle

American Express has outperformed Visa and Mastercard over the last year, three-year, and five-year periods -- but has lagged both its peers over the last decade. A big reason for American Express's recent breakout relative to Visa and Mastercard is likely its focus on affluent customers, which makes it more resilient to a potential economic downturn or prolonged period of consumer spending declines.

Financial security is closely tied to spending. Someone living paycheck to paycheck without an emergency fund is more likely to be sensitive to inflation and the cost of living outpacing wage growth than someone with a more substantial financial cushion. What's more, a lot of different asset categories are at or near all-time highs --- from the U.S stock market to real estate prices and even gold. Individuals who have benefited from the value expansion in these categories may be better off now than they were when inflation was lower.

As mentioned, the S&P 500 has doubled in the last five years -- and inflation hasn't gone up nearly as much. So folks who own a lot of stocks and have seen their wealth compound may have no issues paying up for discretionary goods and services even if prices have gone up. This is the group of consumers that American Express is targeting, which is what makes it a great bet for investors concerned about a weakening job market or rising inflation.

Even if consumer spending pressures persist, Visa and Mastercard will still generate strong returns because they make money every time a card is swiped, tapped, or processed digitally, regardless of the transaction size. But they are arguably more sensitive to pullbacks in discretionary spending by non-affluent consumers than American Express.

The Federal Reserve's decision to lower interest rates could be a boon for American Express, Visa, and Mastercard. But American Express is a safer bet for investors who value companies with loyal customer bases.

American Express is still a great value

Visa and Mastercard are phenomenal, high-margin companies. But American Express is the better buy for investors looking for a more recession-resistant company at a less expensive valuation and with a higher dividend yield. American Express has a forward price-to-earnings ratio of just 22.2. Its yield is only 1%, but that's mainly because the stock has done so well and outpaced its dividend growth rate. American Express has been boosting its payout at an impressive rate in recent years. Its most recent raise was by 17%, and the payout has nearly tripled over the last decade.

All told, American Express is still a great stock to buy now and has what it takes to continue delivering strong returns for years to come.

Should you invest $1,000 in American Express right now?

Before you buy stock in American Express, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and American Express wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $652,872!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,092,280!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 189% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 22, 2025

American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Mastercard, and Visa. The Motley Fool has a disclosure policy.