For the balance of the year, we'll be focusing on companies that we believe are well-positioned for the slow-growth environment that we envision for 2013. These names all sport strong balance sheets and rock-solid business franchises -- qualities that should easily help them withstand a broader soft patch. That said, given the fiscal-cliff uncertainty, we would start with partial positions in each, even though we like these stocking-stuffers at their current prices. In the event of a market selloff, we would then fill out each position at lower levels -- and, of course, should we see a resolution to the fiscal impasse, we would be comfortable paying somewhat higher prices.
In this column, we will highlight American Express (AXP). Among financial-sector names, this company was one of the best at navigating the 2008-to-2009 financial crisis and recession. Earnings did fall by more than 50% during this stretch, with annual net income falling to $2 billion vs. the normal level of $3 billion to $4 billion. However, the firm never lost money during this period. Sustaining profitability throughout the financial crisis, the worst U.S. business downturn for more than 50 years, was a feat that few financial institutions managed to accomplish.
It's important to note, as well, that this earnings decline was due to credit writedowns, rather than a cyclical or secular decline in the business.
In any case, since then AmEx has regained all of its lost ground, and is back to reporting record profits, with Street estimates calling for 2012 income north of $5 billion. This has taken place even despite an uncertain global economy, and can be attributed to AmEx's premiere global brand, extensive global card base and merchant infrastructure, as well as to accelerating global electronic-spending trends. Also lending support has been growth in emerging markets and continued cross-border spending trends in key developed markets of North America and Europe.
For the most recent quarter, AmEx delivered solid earnings of $1.09 per share, in line with consensus. Billed business grew by more than 8%, including foreign-currency effects, while marketing and promotional expenses remained in line with trends. Credit write-offs continued to decline to record low levels, and -- thanks to robust capital ratios, which exceeded 12% of assets -- management expects higher returns on capital, going forward. Management also affirmed guidance for the year, even despite the tougher macroeconomic concerns across North America, Europe and the emerging world economies.
There is a lot that we like about AmEx. It sports a stable revenue and earnings growth profile, combined with an attractive valuation level at 12x analysts' 2013 EPS estimate of $4.71. The stock currently has a modest 1.37% dividend yield, but an above-average AA investment grade credit rating and a below-average 17% payout ratio, which we expect to rise in the future.
Looking ahead, we expect AmEx to generate consistent revenue growth of 5% per year, as well as earnings and dividend growth of more than 10% each. The stock is also currently trading at a 2x multiple, which points below its long-term historical valuation level of 14x earnings. That allows for upside capital appreciation from current levels.
Given all its strengths, we think the current price would be an attractive buy entry for this blue-chip franchise.