American Express – A Featured Stock In Dividend Growth Model Portfolio

This report highlights last month’s top performers and features a stock from the current portfolio. 

Recap from February’s Picks

Our Dividend Growth Stocks Model Portfolio outperformed the S&P 500 on a price return basis and performed in line on a total return basis last month. The Model Portfolio fell 2.1% on a price return basis and fell 2.0% on a total return basis. The S&P 500 fell 2.4% on a price return basis and fell 2.0% on a total return basis. The portfolio’s best performing stock was Nu Skin Enterprises (NUS), which was up 5%. Overall, 16 out of the 30 Dividend Growth Stocks outperformed the S&P last month, and eight had positive returns.

The long-term success of our model portfolio strategies highlights the value of our Robo-Analyst technology, which scales our forensic accounting expertise (featured in Barron’s) across thousands of stocks.

The methodology for this model portfolio mimics an All-Cap Blend style with a focus on dividend growth. Selected stocks earn an Attractive or Very Attractive rating, generate positive free cash flow (FCF) and economic earnings, offer a current dividend yield >1%, and have a 5+ year track record of consecutive dividend growth. This model portfolio is designed for investors who are more focused on long-term capital appreciation than current income, but still appreciate the power of dividends, especially growing dividends.

Featured Stock from March: American Express Company (AXP: $93/share)

Credit card provider American Express Company (AXP) is the featured stock from March’s Dividend Growth Stocks Model Portfolio. AXP was first featured in our January 2016 case study on how return on invested capital (ROIC) impacts stock valuation. Since then, the stock is up 52% while the S&P 500 is up 27%. Despite this outperformance, AXP remains undervalued.

Since 2010, AXP’s revenue has grown 2% compounded annually while its after-tax profit (NOPAT) has grown 18% compounded annually. AXP’s NOPAT margin has improved from 6% in 2010 to 16% in 2017 while its return on invested capital (ROIC) improved from 6% to 14%.