How To Earn $500 A Month From American Express Stock In The Wake Of Dwindling U.S. Consumer Health

American Express Company AXP issued an upbeat second-quarter earnings beat Friday before the market opened, though investors pushed the stock more than 5% lower before it began paring losses.

Here's what investors need to know about the earnings print, the health of the U.S. consumer and how to yield a consistent $500 per month from its shares.

Earnings By The Numbers: The New York City-based lender issued $2.89 per share, ahead of the $2.80 estimate, on revenues of $2.17 billion, ahead of the $1.96 billion estimate, according to Benzinga Pro.

Despite the beat, shares traded lower due to much higher provisions for credit losses, which soared from $410 million a year ago to $1.198 billion this year, the company said in its report.

The staggering $1.57 billion increase reflected higher net write-offs and a net reserve build of $327 million, compared with a net reserve build of $58 million a year ago. Credit metrics remained strong in the current quarter, the company said.

However, for dividend-focused investors, a look beyond American Express’ higher net write-offs show profitable times ahead.

American Express currently offers a dividend yield of 1.36%. With a downturn in credit health, consistent dividend income could provide a sturdy lifeboat.

So how can an investor earn $500 per month from AXP's dividends?

Breaking it down, a $500 monthly yield amounts to $6,000 annually. Dividing the annual figure by American Express’ 1.36% dividend yield gives us: $6,000 / 0.0136 = $441,176.47.

So, to bring home $500 per month from American Express dividends, you’d need to invest around $441,176.47, or about 2,575 shares.

If you're aiming for a more modest monthly dividend income, say $100, you would need to invest around $88,235.29, or about 515.03 shares.

Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.

The dividend yield is calculated by dividing the annual dividend payment by the stock price. As the stock price changes, the dividend yield will also change.

For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).

Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).

Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.

However, the credit card giant’s dividend isn’t the only factor at play here.

In the wake of American Express’s earnings, we’re seeing a domino effect on consumer health indicators across the financial sector. Increases seen in provisions for credit losses is a glaring signal of a deteriorating consumer financial health in the U.S.

To get a broader picture of the trend, read this article.

AXP Price action: Shares of American Express are trading 3.34% lower to $171.19, according to Benzinga Pro.

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Photo: Courtesy American Express