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Is American Tower's (AMT) Recent Dividend Hike Sustainable?

Zacks Equity Research

American Tower Corporation AMT has announced a 1.9% sequential hike in the quarterly cash dividend. The company will now pay a dividend of $1.10 per share, up from $1.08 paid in the prior quarter. The increased dividend will be paid out on Jul 10 to shareholders of record as of Jun 19, 2020.

Based on the increased rate, the annual dividend came to $4.40 a share, resulting in an annualized yield of about 2%, considering the company’s closing price of $229.97 on May 19.

Can American Tower Maintain its Payout?

American Tower’s ability to sustain the hiked dividend depends on funds from operations (FFO) growth and payout ratio. The company’s current payout ratio is 46.8%, lower than the industry’s 68.1%.

Additionally, its performance depicts a robust FFO picture. Over the next five years, its FFO is projected to grow at a rate of 14.7%.

The company also has a robust operating platform and ample liquidity to support the dividend payment. Its consistent adjusted EBITDA margins, double-digit revenue growth and favorable return on invested capital indicate the strength in its core underlying business. As of the March-quarter end, it had $4.2 billion of total liquidity, consisting of $1.3 billion in cash and cash equivalents, and availability of $2.9 billion under its revolving credit facilities (net of any outstanding letters of credit).

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

Conclusion

American Tower remains committed to increase 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. We believe that such disbursements highlight the company’s operational strength and commitment toward rewarding shareholders handsomely.

Lastly, 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 REIT investors. Such moves also boost investors’ confidence in the stock.

Shares of this Zacks Rank #3 (Hold) company has gained 16% as against its industry’s decline of 12% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 


Better-Ranked Stocks to Consider

Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 FFO per share moved upward to 83 cents over the past month. The company currently flaunts a Zacks Rank of 1.

Gladstone Land Corporation’s LAND FFO per share estimate for 2020 moved 3% upward to 68 cents over the past week. Further, it currently carries a Zacks Rank of 2 (Buy).

Clipper Realty Inc.’s CLPR FFO per share estimate for the ongoing year has been unchanged at 57 cents over the past 30 days. Additionally, it 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 REIT (AMT) : Free Stock Analysis Report
 
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