Meet the Dividend Growth Stock That Warren Buffett Held for Decades, and Greg Abel Pegged as One of Berkshire Hathaway's Multidecade Compounders

On Jan. 1, Greg Abel succeeded Warren Buffett as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), taking over a portfolio of publicly traded equities worth hundreds of billions of dollars, as well as other controlled companies worth even more -- such as Berkshire's insurance businesses, railroads, Berkshire Hathaway Energy, manufacturing, service, retail businesses, and more.

Abel wasted no time making some massive portfolio moves, including selling several small positions and pole-vaulting Alphabet (on Buffett's recommendation) to one of Berkshire's top five holdings. Amid the portfolio changes, Abel added steadfast conviction to Berkshire's largest holdings, saying that Berkshire's concentration in American Express (NYSE: AXP), Apple, Coca-Cola, and Moody's will continue, as Berkshire expects these companies to compound over decades.

But it has been a rough year for American Express investors. The stock fell 4.3% on July 24 in response to its second-quarter 2026 earnings report, putting American Express down 11.8% year to date.

Here's why American Express is a no-brainer value stock to buy now despite its post-earnings sell-off.

Image source: The Motley Fool.

On pace for a banner year

American Express barely missed on revenue expectations and noted an uptick in expenses related to its revamped U.S. Platinum Card perks. The sell-off seems overblown, given that the payment processor and card issuer raised its guidance and now expects a 10% increase in 2026 revenue.

The upbeat growth stems from strong customer additions and increasing customer spending. On a foreign-exchange-adjusted basis, which accounts for currency fluctuations, American Express reported 9% card member spending growth in Q2, which is the highest rate in three years. American Express is guiding for full-year earnings per share of $17.30 to $17.90, which would be an all-time high.

American Express's loyal customer base and steadily rising earnings enable it to consistently increase dividends and repurchase stock at a breakneck pace, accelerating earnings-per-share growth. As of the six months ended June 30, American Express has 682 million shares outstanding, down 3% from a year prior. And over the past decade, American Express has reduced its share count by more than 25%, it's roughly tripled its dividend, and the stock price has more than quintupled. Yet American Express remains an incredible value because earnings growth and buybacks have kept the valuation in check. American Express trades at just 18.5 times the midpoint of its 2026 earnings estimate.

A winning formula

American Express continues to deliver double-digit revenue and earnings growth even amid strained consumer spending. That growth is a testament to the strength of its business model.

American Express caters to an affluent customer base with a reward system built around discretionary spending and perks. Because of high spending on wants rather than needs, the customer base may be less sensitive to inflationary pressures, such as higher gas, food, and shelter costs.

Its members win because their perk value nearly doubles their membership costs on average. American Express collected just $5.61 billion in net card fees in the six months ended June 30, compared with $9.94 billion in card member rewards expenses.

If card fees were the only source of American Express's income, the company wouldn't last long. But like its card members, American Express also wins because customers have an incentive to prioritize spending with their American Express cards to justify the high annual fees and maximum membership rewards. The amount of fees that American Express collected from merchants alone in the six months ended June 30 was roughly double card member reward expenses.

And the merchants win because, although they pay American Express high fees, they still generate sales they might not have made if they hadn't accepted American Express.

American Express shareholders have historically won too because the company generates steady earnings growth that has justified a higher stock price, as well as rising cash flows that allow it to return capital to shareholders through a growing dividend and buybacks.

Add it all up, and American Express is as close to a perfect business model as you'll find.

A top-tier stock to buy now

American Express checks all the boxes of a textbook Warren Buffett stock. It has an established business model and brand, a wide moat from the network effects of its loyal customer base, and a clear path to growing earnings for decades to come. So it's no surprise that Abel called it out as a core Berkshire holding he expects to compound well into the future.

Add it all up, and American Express stands out as one of the best dividend growth stocks for investors to buy now, and one worthy of building an everlasting portfolio around.

American Express is an advertising partner of Motley Fool Money. Daniel Foelber has positions in American Express. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, and Moody's. The Motley Fool has a disclosure policy.