Charge card issuer American Express (AXP - Get Report) is having a great year in 2012 -- the firm's shares have already risen more than 21% since the first trading day in January. And management is working on directly increasing shareholder returns thanks to the 11.1% dividend hike that was announced yesterday. The move brings Amex's payout to 20 cents per share, a 1.26% yield.
In a world where attracting credit card dollars is highly competitive, American Express has taken the path less traveled and asked consumers to pay for the privilege of using its flagship charge card products. In exchange, cardholders get benefits and services that aren't offered by competing issuers -- it's a model that's helped Amex capture far more dollar volume per customer than rival networks.That's not to say that the firm hasn't embraced the more attainable credit model; by opening its network to new issuers, Amex has been seizing the opportunity to grow its dollar volume with limited risk and cost. Financially, American Express is in strong shape thanks to a business that throws off significant cash flows. While a 1.26% yield hardly makes Amex worthy of consideration as a core income holding, investors looking for a less commoditized alternative to Visa (V) or MasterCard (MA) should give AXP a second look. American Express, one of Warren Buffett's stocks, shows up on a recent list of 7 Improving Credit Card Stocks. Follow @stockpickr