This Dividend Stock Will Hold Up No Matter the Market Conditions
Dividend stocks are typically mature, established companies with low growth rates but with the ability to generate ample amounts of cash that they pay out to shareholders. Unless an economic or industry-wide downturn occurs, solidly built companies are rarely tested on their ability to pay dividends. Sometimes, companies are additionally structured to pay out most of their earnings to shareholders.
But that hasn't always been the case. Several companies suspended or cut their dividends in the wake of severe pandemic-driven declines. Disney, for one, still hasn't reinstated it. However, resilient businesses maintained their dividends even under harsh economic conditions. American Express (NYSE: AXP) is one company that has raised its dividend for many years, and shareholders should expect it to hold up in any market.
American Express targets an affluent customer base with a penchant for travel and leisure. It offers perks in those areas that attract cardmembers and generate growth. At the beginning of the pandemic, when people who could afford to travel had no choice but to curtail travel and entertainment (T&E) spending, this strategy did contribute to a slide in revenue. However, in a show of superlative resilience, the company remained profitable even at its highest declines, which were 29% year over year in the 2020 third quarter. It quickly bounced back due to a quick recovery in non-T&E spending and the company's "robust underwriting and risk management capabilities." The resilient consumer base and a history of tight management kept the company in great operational shape despite challenges, although it did not raise the dividend in 2021.
Source Fool.com
