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American Tower (AMT) Cheers Investors With 6.1% Dividend Hike

American Tower Corporation AMT recently announced that its board of directors has approved a quarterly dividend payment of $1.21. This represents a sequential hike of 6.1% from the prior dividend of $1.14. Reflecting investors’ positive sentiments, the stock gained 1.08% during Friday’s regular session.

Based on the hiked rate of $1.21 for the quarter, the annual dividend comes to $4.84 per share. This new dividend will be paid on Feb 2, 2021, to shareholders of record on Dec 28, 2020. At this new rate, the annualized yield comes at 2.1%, based on the stock’s closing price of $228.67 on Dec 4.

American Tower is committed to increasing shareholder value through dividend hikes. The company has consistently increased its quarterly dividends since 2012. In fact, its average annual dividend per share has witnessed growth of more than 20% since 2012. Moreover, this September, the company announced a 3.6% sequential hike in quarterly dividends to $1.14 per share. We believe such disbursements highlight the company’s operational strength and commitment toward rewarding shareholders handsomely.

Is the Dividend Hike Sustainable?

American Tower’s ability to sustain the hiked dividend depends on its funds from operations (FFO) growth and payout ratio. The company’s current payout ratio is 51.73%, lower than the industry’s 75.19%.

Additionally, its performance highlights a healthy FFO picture. Over the next five years, its FFO is projected to grow at a rate of 15.9%, ahead of the industry average of 7%.

American Tower also has a robust operating platform and ample liquidity to support the dividend payment. The company is well positioned to benefit from incremental carrier network investments, driven by increasing mobile data usage and growth in 5G deployment. These are likely to drive leasing activity over the long term.

The REIT’s continued revenue growth and adjusted EBITDA margins as well as favorable return on invested capital indicate the strength in its core underlying business and support the company’s ability to manage near-term obligations.

As of the third-quarter end, American Tower’s net leverage ratio was at 4.5X, while total liquidity stood at $6.7 billion. Moreover, during the third quarter, the company extended debt maturities and reduced weighted average costs of borrowings on the back of refinancing efforts.

These indicate that the company’s dividends are well covered and it will be able to sustain its current hiked dividend.

Conclusion

As investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to bet their money on, solid dividend payouts are the biggest enticement for REIT investors. Such moves boost investor confidence in the stock.

Shares of this Zacks Rank #3 (Hold) company have gained 7.5% as against its industry’s decline of 3.4% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Extra Space Storage Inc.’s EXR Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has moved up marginally to $5.03 over the past week. The company currently sports a Zacks Rank of 1.

Innovative Industrial Properties, Inc.’s IIPR FFO per share estimate for the current year has been revised upward by 2.6% to $5.11 over the past month. The company carries a Zacks Rank of 2 (Buy), currently.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for ongoing-year FFO per share has moved 5.3% north to $1.20 in a month’s time. The company holds a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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American Tower Corporation (AMT): Free Stock Analysis Report
 
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