American Tower Corp: Bullish 5G Play Raises Dividend for 39th Consecutive Quarter

American Tower Stock Great For Growth & Income

5G technology is touted for its amazing speed, but the rollout of 5G networks has been anything but speedy. The technology began rolling out in 2018, but because of the COVID-19 pandemic, testing, and regulations, it isn’t being rolled out all at once.

While it will still take a few years for 5G to reach the vast majority of Americans, one 5G company you can count on to be a leader in the industry is American Tower Corp (NYSE:AMT).

A real estate investment trust (REIT) with one of the largest wireless tower portfolios on Earth, American Tower Corp is part of the backbone of the 5G sector. It’s also a top 5G stock we’ve been following for a while.

In addition to providing investors with solid long-term share-price growth, as a REIT, American Tower has to return the vast majority of its earnings to its shareholders in the form of dividends.

The company recently announced a dividend of $1.39 per share, for a yield of 2.1%. The fourth-quarter payout represents the 39th consecutive quarter in which the REIT has raised its dividend. (Source: “Dividend History,” American Tower Corp, last accessed April 7, 2022.)

American Tower has basically hiked its payout every quarter since it converted into a REIT in the fourth quarter of 2011. Over that period, it has raised its quarterly dividend by 561%, from $0.21 in the first quarter of 2012 to $1.39 in the fourth quarter of 2021.

American Tower Corp is able to raise its payouts because it continues to report healthy financial results, including double-digit growth in net income and adjusted funds from operations (AFFO).

That momentum is expected to continue, with American Tower Corp announcing record new site construction activity and the closing of key acquisitions that will enhance future growth as the rollout of 5G accelerates.

Despite the company’s strong outlook, American Tower stock has taken a hit like the rest of the stock market. As of this writing, AMT stock is flat over the last six months, down by nine percent year-to-date, and up by 11% year-over-year.

That trajectory should change over the coming quarters as headwinds, including the COVID-19 pandemic and inflationary pressure, subside. Keep in mind, the 5G rollout is still in its infancy and the demand for connected devices is soaring.

From 2022 through 2027, connected devices are expected to increase in the U.S. at a compound annual growth rate (CAGR) of 8.1%. (Source: American Tower Corporation: An Overview, Fourth Quarter 2021,” American Tower Corp, last accessed April 7, 2022.)

Moreover, data usage per customer is exploding thanks to data hogs like “Spotify,” “YouTube,” and “Netflix.”

The demand for wireless devices, data usage, and bandwidth is only going to grow. That, in turn, will fuel the need for wireless infrastructure like communication towers.

Chart courtesy of StockCharts.com

About AMT Stock

American Tower Corporation is one of the largest global REITs. It has a portfolio of more than 200,000 communication sites, including more than 43,000 in the U.S. and Canada and 177,000 in other countries.

The vast majority (97%+) of the company’s revenue is generated from leasing out its towers, as well as fiber, U.S. data centers, and other urban telecommunication assets in some of its international markets.

Some of the wireless customers American Tower Corp leases its towers (and the land it sits on) to are AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and T-Mobile US Inc (NASDAQ:TMUS).

One of the biggest benefits of owning wireless communication towers is the economy of scale. The tower is already there, so leasing out unused space doesn’t really cost American Tower anything. The return on investment (ROI) with one tenant per tower is three percent, and it jumps to 13% with two tenants and 24% with three tenants.

Acquisition of CoreSite Realty

In December 2021, American Tower closed on its previously announced acquisition of CoreSite Realty Corporation for approximately $10.1 billion in cash. (Source: “American Tower to Acquire CoreSite,” American Tower Corp, November 15, 2021.)

CoreSite owns 25 data centers, 21 cloud on-ramps, and more than 32,000 interconnections in eight major U.S. markets. American Tower expects to leverage its financial position to accelerate CoreSite’s development pipeline in the U.S. and evaluate the potential for international expansion.

The deal also adds CoreSite’s data and cloud management capabilities to American Tower Corp’s mobile edge computing business, allowing the company to offer a broadened variety of 5G and cloud solutions.

Before the acquisition, CoreSite had been the best-performing data center REIT over the last decade, with returns of more than 1,400%, or more than 31% on an annualized basis.

During the third quarter of 2021, the last period before it joined American Tower Corp, CoreSite generated annual revenue of $655.0 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $343.0 million. Over the previous five years, CoreSite averaged double-digit annual revenue growth.

2021 Double-Digit Growth in AFFO Per Share

For the fourth quarter ended December 31, 2021, American Tower announced that its total revenue increased by 15.2% year-over-year to $2.45 billion. Its property revenue advanced 13.3% to $2.37 billion. (Source: “American Tower Corporation Reports Fourth Quarter and Full Year 2021 Financial Results,” American Tower Corp, February 24, 2021.)

The REIT’s net income in the fourth quarter increased by 33.0% year-over-year to $441.0 million, or $0.99 per share. Its adjusted EBITDA went up by 10.2% year-over-year to $1.5 billion, while its consolidated AFFO climbed by 6.5% to $996.0 million, or $2.18 per share. Its free cash flow for the quarter was $212.0 million.

American Tower Corp’s full-year 2021 revenue went up by 16.4% year-over-year to $9.4 billion, with its property revenue advancing 14.5% to $9.1 billion. Its net income in 2021 went up by 51.8% to $2.6 billion, or $5.66 per share.

The company’s adjusted EBITDA in 2021 increased by 16.0% to $6.0 billion and its consolidated AFFO went up by 15.4% to $4.4 billion, or $9.65 per share. Its full-year free cash flow went up by 21.4% year-over-year to $3.4 billion.

Analyst Take

American Tower stock is an excellent 5G stock that keeps getting better.

American Tower Corp has been experiencing high demand, it continues to report robust financial results, and it continues to dominate the global 5G infrastructure space.

While there will be periods of volatility, the company’s reliable, growing dividend should help AMT stock investors ride it out.