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American Tower (AMT) Cheers Investors with 3.1% Dividend Hike

American Tower Corporation AMT rewarded its investors with a 3.1% sequential hike in quarterly dividends on the company’s common stock, increasing it to $1.31 from $1.27 paid out earlier. The raised dividend is scheduled to be paid on Oct 15 to shareholders of record as of Sep 28, 2021.

Based on the new rate, the annualized dividend rate comes to $5.24 per share, up from the prior annual rate of $5.08 per share. This indicates an annualized yield of roughly 1.76%, considering American Tower’s closing price of $297.14 on Sep 16.

Moreover, American Tower called for redemption of its entire outstanding 4.70% senior unsecured notes due 2022 on Oct 18, 2021. The company plans to fund the redemption with borrowings under its senior unsecured revolving credit facilities and cash on hand.

Can American Tower Maintain Its Payout?

American Tower has a disciplined capital-allocation strategy and has consistently increased its dividend since 2012. Its average annual dividend per share has witnessed growth of more than 20% since 2012. Looking at the company’s funds from operations (“FFO”) growth and payout ratio, it will likely be able to sustain the hiked dividend.

Its consolidated adjusted funds from operations (“AFFO”) witnessed a CAGR of 14.8% over the last 10 years (ended 2020). The healthy trend is expected to continue in 2021, with consolidated AFFO projected to increase 13.6% year over year at the mid point, promising rewards for investors in the upcoming period. American Tower’s current payout ratio is 52.9%, lower than the industry average of 67.6%.

The advancement in mobile technology and the proliferation of bandwidth-intensive applications are propelling growth in mobile data usage globally. Therefore, with an extensive and geographically diversified communication real estate portfolio, American Tower is well-poised to benefit from the increasing capital spending by wireless carriers in 5G deployments and future deployment of additional spectrums.

Amid the tailwinds, the company is expanding its portfolio on the back of acquisitions. In January 2021, American Tower entered into definitive agreements with Spain’s Telefónica, S.A. to acquire the latter’s telecom tower unit, Telxius Towers, consisting of around 31,000 communication sites, spanning across Germany, Spain, Brazil, Chile, Peru and Argentina. During the second quarter, the company spent $8.8 million to acquire 27,000 communications sites.

Bottom Line

Such disbursements demonstrate American Tower’s operational strength and commitment toward rewarding its shareholders handsomely. The hike reflects American Tower’s ability to generate solid cash flow growth through its operating platform and high-quality portfolio.

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 arguably the biggest enticement for them.

Shares of this Zacks Rank #3 (Hold) company have gained 10.2% over the past three months compared with the industry's growth of 3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Key Picks

The Zacks Consensus Estimate for Alexander & Baldwin Holdings, Inc.’s ALEX ongoing-year FFO per share has been revised 32.4% upward over the past two months. The company carries a Zacks Rank of 2 (Buy), currently.

The Zacks Consensus Estimate for CubeSmart’s CUBE 2021 FFO per share has moved marginally upward over the past month. The company currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Extra Space Storage Inc.’s EXR current-year FFO per share has moved marginally north in the past 30 days. The company carries a Zacks Rank of 2, at present.

Note: Anything related to earnings presented in this write-up represent 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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