Why Warren Buffett's Decades-Long Conviction in American Express Could Be Your Wealth-Building Blueprint

The legendary investor Warren Buffett has long viewed American Express as a cornerstone holding, and the numbers tell a compelling story. Over the past decade, AXP shares have surged nearly 550%, while total returns including reinvested dividends reached an impressive 644%—substantially outpacing the S&P 500’s 330%. This track record raises an important question: could a strategic position in this blue-chip financial services giant deliver the kind of long-term wealth accumulation that Buffett has championed throughout his investing career?

A Fundamentally Different Business Model Than Visa and Mastercard

American Express operates in a category of its own within the payment ecosystem. While Visa and Mastercard function primarily as network operators—licensing their brands to banks without directly managing customer accounts—American Express acts as both the card issuer and account administrator. This structural distinction creates a meaningful competitive moat.

The revenue streams tell the story. Visa and Mastercard generate the bulk of their income through merchant swipe fees on each transaction. American Express captures swipe fees too, but adds another significant revenue layer: net interest income from the credit cards it directly issues. This dual-income model acts as a natural hedge. When interest rates rise, consumer spending typically contracts, which pressures swipe fee volumes across all three competitors. However, American Express can offset this headwind by generating substantially higher net interest income on its outstanding card balances. The same diversification also fortifies the company against proposed merchant fee caps and antitrust scrutiny.

Navigating Macro Headwinds and the Political Economy of Finance

Like all card issuers, American Express faces headwinds that flow from the broader political and policy environment. The Trump administration recently proposed a temporary 10% cap on credit card interest rates—a proposal that would materially compress American Express’ net interest income. However, such measures face steep legal and political hurdles, and their adoption remains unlikely in the near term.

Beyond interest rate caps, American Express operates within an evolving political economy where different policy regimes can shift the competitive landscape. Regardless of which political party controls financial regulation at any given moment, American Express’ diversified model and focus on affluent, lower-risk cardholders have consistently positioned it well. The company’s customer base—typically more creditworthy and less dependent on interest-rate-sensitive behavior—provides natural insulation against the kind of consumer stress that might accompany restrictive policy regimes.

The company also faces competitive pressures from regional banks offering their own card programs and fintech platforms venturing into lending. Yet its brand recognition, ecosystem benefits, and data advantages remain formidable.

The Growth Thesis Remains Intact

Despite near-term policy uncertainties, analysts project American Express’ earnings-per-share to expand at a 14% compound annual growth rate through 2027. This growth trajectory should be underpinned by its strategic focus on high-net-worth, lower-risk customers; meaningful international expansion opportunities; and secular tailwinds from rising travel and entertainment spending among affluent consumers.

At 20 times current-year earnings, American Express trades at a reasonable valuation that doesn’t presuppose best-case scenarios. The market is pricing in moderate, not exuberant, expectations for the business.

The Income and Capital Allocation Story

While American Express’ forward dividend yield of 0.9% may seem modest on its surface, the company maintains significant room for future payout increases. With a payout ratio of just 21%, the company retains substantial earnings to reinvest through share buybacks and dividend growth. This balanced approach to capital allocation has historically rewarded long-term shareholders through compounding.

The Investment Framework

American Express will not deliver venture-capital-style returns or the kind of explosive growth that captures headlines. It is, however, a business fundamentally designed to generate steady, above-market returns through economic cycles. The company’s brand, customer base, business model diversification, and disciplined capital allocation align with the principles that have guided Warren Buffett’s most successful investment decisions over decades.

The question isn’t whether American Express offers a lottery ticket. It’s whether you’re seeking a proven, reasonably-valued vehicle for long-term wealth accumulation with a track record of outperforming broader market indices. For investors with that objective, American Express’ combination of resilience, growth, and capital return discipline suggests it remains a compelling addition to a long-term portfolio—not because it promises to transform your life overnight, but because it exemplifies the kind of enduring business that Buffett has consistently championed as a foundation for building wealth across generations.