Pros and Cons of Investing American Express

PHOTO CREDIT: American Express

OVERVIEW

American Express Company is a company based in the United States. The company operates a payment platform that connects merchants and consumers around the world. The company offers a set of payment products like credit and debit cards to consumers around the world. Merchants can make transactions through the company’s platform with these cards. The company was founded in 1850.

Why You Should?

  1. American Express is a great reopening play in an investor’s portfolio. The company saw a drop in payment volumes as people stayed indoors and stopped traveling and making some kinds of purchases. However, once this pandemic is over, the company will see a strong demand return for its products.
  2. The COVID-19 pandemic further decelerated the use of cash to make transactions and an increase in the popularity of digital payment options, like using American Express cards. For example, consumers used their credit cards to shop on Amazon and get food delivered to their doorstep. This long-term trend change will benefit the company and its investors.
  3. American Express operates a strong dividend for its investors. At the moment, the company offers a dividend of $1.72, or 1%, per stock per year. The company has continued to increase this amount year over year as well. This has benefited long-term investors in the company who have continued to receive good amounts of dividends from the company.
  4. Digital payment systems, like credit and debit cards, are extremely popular with younger consumers who are driving the growth of this industry for the past couple of years. As younger consumers continue to sign up for more credit and debit cards and as merchants purchase more digital payment technology, it will benefit the company and its investors.
  5. American Express is known to be a premium credit card brand for consumers. The company’s credit cards come with significant annual fees and extremely luxurious perks, like airline mines and airport lounge access. This premium brand recognition and customer loyalty will benefit the company and its investors.
  6. American Express, like many other payment processing companies, has an extremely profitable business model. The company makes the bulk of its money for card-branding deals, payment transaction fees, and annual cardholder fees. A profitable business model has benefited the company to grow its core business and has also benefited investors in the company.

Why You Should Not?

  1. The company faces tough competition in the payment processing and platform industry. Some of these competitors include Visa, MasterCard, Square, PayPal, and many others. This competition might hurt the company and its investors in the future.

MY OPINION

I think that American Express is a decent long-term investment due to its position as a good reopening play, positive impacts from the pandemic, a good dividend play, its popularity with young consumers, a strong brand recognition, as well as a profitable business model. However, tough competition might hurt the company and its investors in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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