The first time I invested a significant amount of money in individual stocks was in 2014. Before that I mainly invested in index funds while learning things like stock analysis and asset allocation strategies. To be sure, I've been buying small amounts of stock in certain companies since the early 2000s, but I'm over 90% invested in funds.

Then, in early 2014, I looked through my former employer's 401(k) application and decided it was finally time to buy some larger (for me) individual stock positions. I invested in four stocks, two of which are still in my portfolio today. Both generated positive total returns, but in about 10 and a half years the total return was 264% (approximately 13% annualized), American Express (NYSE: AXP) Always the best.

A lot has happened in the decade and a half since I became an American Express shareholder, and not all of it was good. For example, in 2016, American Express and Costco The two sides ended a 16-year partnership, at which time American Express's co-branded Costco credit card accounted for about 10% of all American Express cards in circulation and about 20% of interest-bearing credit card loans.

However, some significant progress has been made. Shortly after its partnership with Costco ended, American Express revamped its flagship Platinum card with benefits like free Uber rides aimed at younger, affluent customers. In the years since, the Platinum Card has been a major growth driver.

American Express has also done well in adopting online banking products such as savings accounts, which provide a low-cost source of funds. The acquisition of Kabbage in 2020 also significantly improved the company's commercial banking business.

Overall, since I purchased the stock, American Express's revenue has increased 94% compared to comparable levels in 2014. Looking at the bottom line, earnings grew 147%. Since mid-2014, American Express has reduced its number of outstanding shares by more than 26% through buybacks.

Even in its most recent quarter, American Express's revenue rose 8% year over year despite numerous reports that consumers were cutting back on discretionary spending. The company's loan portfolio grew 10% year over year to $202 billion, and its cardmember loans and receivables had an annualized charge-off rate of 1.9%, up 1.9% from a year earlier. decline It is much lower than its peers, which shows the asset quality of American Express. For context, capital one The credit card net charge-off rate is approximately 5.6%.

First, I buy American Express for the long-term dividend growth opportunity, and the stock (and business) is performing exactly what I want. Despite some setbacks, management has done a great job of continuing to grow the business through various political and economic circumstances, and I have no reason to believe that will change anytime soon. As a credit card lender, American Express has a stellar customer base and an impressive product portfolio when it comes to credit quality. As a closed-loop payments network, the swipe fees American Express earns should increase over time as customers spend.

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