American Tower Corp: Perfect 5G Stock for Growth & Passive Income?

American Tower Stock’s Dividends Keeps Rising

American Tower Corp (NYSE:AMT) continues to get better and better. A provider of cellular and wireless infrastructure, the company has been expanding its global reach, as well as announcing new acquisitions, partnerships, and excellent financial results. The company has also raised its quarterly dividends for 37 consecutive quarters.

With 5G technology still in its infancy and data usage soaring (thanks to data hogs like “Spotify,” “YouTube,” and “Netflix”), it’s fair to say that American Tower’s growth trajectory is in its infancy, too.

AMT stock has been providing buy-and-hold investors with significant share-price growth and passive income. Over the last 10 years, American Tower stock has advanced 485%, expanding at a compound annual growth rate (CAGR) of 20.5%.

AMT stock has also done well over the short term. As of this writing, American Tower stock is up by 33% year-to-date.

Chart courtesy of StockCharts.com

AMT Stock Overview

American Tower is a real estate investment trust (REIT) with more than 214,000 communication towers in 24 countries on six continents. (Source: American Tower Corporation: An Overview, Second Quarter 2021,” American Tower Corp, last accessed September 21, 2021.)

While the majority of the sites (43,100) are in the U.S., you can also find the company’s real estate in India (76,000+), Brazil (23,200), Spain (11,400), Germany (10,700), Mexico (9,900+), and Nigeria (6,500).

American Tower Corp leases out both the space on its towers and the land it sits on to wireless service providers. They, in turn, install equipment on the towers to support their wireless networks and build shelters that contain base-station equipment and heating, ventilation, and air conditioning (HVAC)—which the tenant owns, operates, and maintains.

The joy of wireless communication towers is the economy of scale. Adding additional tenants, equipment, and upgrades generates additional revenue, with the costs to the property owner remaining relatively flat. The tower is already there, so companies like American Tower Corp simply lease out the unused vertical and horizontal space.

The return on investment (ROI) with one tenant per tower is three percent. The ROI jumps to 13% with two tenants and to 24% with three tenants.

The vast majority of American Tower Corp’s revenue (99%) is generated from leasing out its properties, as well as fiber and other urban telecommunications assets.

The company’s biggest clients include AT&T Inc. (NYSE:T), Verizon Communications Inc (NYSE:VZ), and T-Mobile US Inc (NASDAQ:TMUS).

The company’s solid customer base and international presence are why it has been able to provide long-term growth, which is complemented by steadily rising dividends.

Between 2010 and 2020, American Tower Corp’s:

• Property segment revenue expanded at a CAGR of 15.2%
• Adjusted EBITDA grew at a CAGR of 14.4%
• Consolidated adjusted funds from operations (AFFO) expanded at a 14.8% CAGR and 13.7%-per-share CAGR
• Average annual dividend per share grew in excess of 20% since 2012

Another Strong Quarter

For the second quarter ended June 30, American Tower announced that its revenue increased by 20.2% year-over-year to $2.3 billion. Its total property revenue climbed by 17.9% to $2.2 billion. (Source: “American Tower Corporation Reports Second Quarter 2021 Financial Results,” American Tower Corp, July 29, 2021.)

The company’s second-quarter net income increased by 66.8% to $748.0 million. Its net income attributed to common shareholders advanced by 67.3% to $746.0 million. Its net income per common share went up by 65.0% to $1.65.

American Tower Corp’s adjusted EBITDA grew by 21.8% to $1.5 billion. Its consolidated AFFO went up by roughly 19% to $1.1 billion, or $2.42 per share.

Tom Bartlett, CEO, stated, “In addition to delivering double-digit growth in AFFO per Share and 15% dividend growth, we added nearly 27,000 sites through our Telxius Towers acquisition in the quarter, augmenting American Tower’s position as a leading independent provider of communications real estate in Europe.” (Source: Ibid.)

American Tower Corp Increases Dividend for 37th Consecutive Quarter

One of the joys of investing in a REIT is that it has to legally distribute at least 90% of its taxable income to investors in the form of dividends. Since 2012, AMT stock’s dividend has increased every single quarter. (Source: “Dividend History, “American Tower Corp, last accessed September 21, 2021.)

In May, American Tower announced a second-quarter dividend of $1.27 per share, or $5.08 on an annual basis, for a yield of 1.7%.

The company should be announcing its next quarterly dividend hike soon.

Analyst Take

American Tower stock is an excellent 5G stock that has a long history of providing investors with strong share-price gains and reliable, growing dividends.

American Tower Corp continues to report great financial results, and that momentum should continue for years to come.