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American Tower (AMT) Rewards Investors With 2.4% Dividend Hike

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American Tower Corporation AMT rewarded its investors with a 2.4% sequential hike in quarterly dividends on the company’s common shares. Specifically, it hiked its dividend to $1.27 from $1.24 paid out earlier. The raised dividend is scheduled to be paid on Jul 9 to shareholders of record as of Jun 18, 2021.

Based on the new rate, the annualized dividend rate comes to $5.08 per share, up from the prior annual rate of $4.96 per share. This indicates an annualized yield of roughly 2%, considering American Tower’s closing price of $254.11 on May 27.

Can American Tower Maintain Its Payout?

American Tower has a disciplined capital-allocation strategy and has consistently increased its dividend since 2012. In fact, 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 9.1% year over year at the mid-point, promising rewards for investors in the upcoming period. Further, its current payout ratio is 51.3%, lower than the industry average of 70.94%.

Markedly, increased use of mobile data continues to fuel the demand for space on the company’s towers. This is driving splendid leasing activity and organic tenant billings growth. With higher investments in 4G and the ramp-up in 5G deployments and future deployment of additional spectrum, wireless carriers will likely increase spending on their networks.

Amid the tailwinds, the company is expanding its portfolio on the back of acquisitions. In fact, in January 2021, American Tower entered 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.

Bottom Line

We believe that such disbursements demonstrate the company’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.

Lastly, as investors prefer an income-generating stock, solid dividend payouts are arguably the biggest enticement for REIT investors. Needless to say, investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to put their money on.

Shares of this Zacks Rank #3 (Hold) company have gained 18.8% over the past three months compared with the industry's growth of 12.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Industrial Logistics Properties Trust’s ILPT FFO per share estimate for the current year has moved marginally up to $1.88 in the past week. The company currently carries a Zacks Rank of 2 (Buy).

OUTFRONT Media Inc.’s OUT Zacks Consensus Estimate for 2021 FFO per share has moved marginally north to 89 cents over the past month. The company currently carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. BHR carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised around 38% upward in a month to 44 cents.

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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