Why Warren Buffett’s 33-Year-Old Credit Card Stock is Still a Golden Goose

Warren Buffett's been snatching up companies like Pokémon cards for decades, and his collection’s packed with some heavy hitters. We’re talking Coca-Cola, McDonald’s, and let’s not forget his legendary Apple buy back in 2016—yeah, the one he keeps trimming but never fully lets go of. But one of his all-time faves? That would be American Express (Amex). Buffett first scooped up Amex shares way back in 1991, and today, Berkshire Hathaway owns a jaw-dropping 151.6 million shares. That’s good for a cozy $424 million in dividends this year alone. So, what’s the deal? Why is the Oracle of Omaha so obsessed with Amex?

To start, American Express is a brand that does their best to make you feel like you should be walking a red carpet every time you swipe your platinum card. Amex knows its audience: high-spending, loyalty-obsessed customers who enjoy exclusive benefits, from private airport lounges to VIP reservations at the trendiest restaurants. 

In fact, just a few months ago Amex bought reservation apps Resy and Tock for a combined $600 million just to make sure its premium cardholders can score a table at New York's hottest spots. It’s a win-win for Amex—you're enjoying your overpriced dinner, and they’re still making money off the whole thing. They’ve turned dining out into another exclusive perk, and you can bet they’re cashing in while you’re cashing out.

Now, why does this matter to Buffett? Simple. Amex has built a business model that’s practically a money-making machine. In good times, cardmember spending goes through the roof—just look at 2022, when Amex reported total billed business of $1.3 trillion, raking in transaction fees from every swipe. And when the economy slows down, people rely on credit more, and Amex makes bank on the interest. With an average APR around 20%, those balances turn into serious cash flow.

But here’s where it gets even sweeter—Amex cardholders aren’t your typical borrowers. They have some of the lowest delinquency rates in the industry. In Q2 2023, Amex reported a delinquency rate of just 0.9%, way below the industry average. Why? Because Amex caters to high-net-worth individuals who, unlike other credit card users, tend to pay their bills on time.

And let’s not forget dividends. Amex just bumped their quarterly dividend to $0.70 a share, up 8% from last year. Over the last three years, their dividend has shot up by 63%. With a payout ratio of only 19%, there's still plenty of room for those payouts to grow. Buffett’s getting paid to do nothing, and honestly, who wouldn’t love that?

Here’s where Amex shines even more—it profits off inflation. In Q2 this year, they saw an 11% revenue jump. Their secret weapon? Interchange fees that grow as prices rise. The more expensive that avocado toast or airline ticket gets, the bigger Amex’s cut. It’s basically inflation-proof, and Buffett, who’s always thinking long-term, sees Amex as a cash machine that keeps delivering no matter what the economy throws its way.

Let’s be real—finding a solid long-term investment in today’s market is like finding a parking spot in Times Square. The S&P 500 and Nasdaq are both up around 15%, and a lot of stocks are looking more bloated than my brother-in-law on Thanksgiving. But Amex still offers something rare: growth, dividends, and a valuation that doesn't require selling a kidney to buy in. At a price-to-earnings ratio of 19, it’s practically a steal for what you're getting.

Sure, a recession could slow Amex down if everyone starts pinching pennies. But Buffett's been through this dance before. He held onto Amex through the COVID crash, even when its stock dipped to $66 in 2020. And every time Amex takes a hit, it bounces back, thanks to its strong brand and solid business model.

Bottom line: If you're after solid dividends, growth, at a great value, Amex might be your pick. No, it’s not gonna skyrocket 1,000% like some AI or biotech moonshot, but if it's good enough for Buffett, it's probably worth a look.

But, but, but…

While Warren Buffett’s chilling with his long-term American Express shares, raking in those reliable dividends year after year, our Stocks.News alert on Wednesday exploded for a +162.08% gain in less than 24 hours. Yeah, we’re not in the "buy and wait 30 years" business—our premium members saw triple-digit returns, no patience required. And did we mention it’s our fifth straight triple-digit winner? We're basically lighting up the stock market.

Buffett’s all about playing it safe with Amex, but why sit around waiting for steady dividends when Stocks.News premium members are cashing in big every week?

Do the math—if you’re ready to step up your game, upgrade to Stocks.News premium before the next alert drops. Trust us, you don’t want to miss out on another winner.

Until next time, keep grinding and stacking those gains!

Stocks.News holds a position in American Express.