Australia markets closed

    -27.70 (-0.35%)
  • ASX 200

    -25.40 (-0.33%)

    -0.0020 (-0.30%)
  • OIL

    -0.13 (-0.17%)
  • GOLD

    +30.40 (+1.31%)
  • Bitcoin AUD

    -883.09 (-0.87%)
  • CMC Crypto 200

    -15.73 (-1.11%)

    +0.0005 (+0.09%)

    +0.0012 (+0.12%)
  • NZX 50

    -7.75 (-0.07%)

    +82.88 (+0.42%)
  • FTSE

    -16.81 (-0.21%)
  • Dow Jones

    -57.94 (-0.15%)
  • DAX

    -263.66 (-1.44%)
  • Hang Seng

    -170.85 (-0.94%)
  • NIKKEI 225

    +94.09 (+0.24%)

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

American Tower Corporation AMT recently announced a hike in its quarterly dividend on the company’s common stock to $1.57 per share from $1.56 paid earlier. The raised dividend is scheduled to be paid out on Jul 10 to shareholders of record as of Jun 16, 2023.

Based on the new rate, the annualized dividend rate comes to $6.28 per share, up from the prior annual rate of $6.24. This indicates an annualized yield of roughly 3.4%, considering American Tower’s closing price of $182.56 on May 25.

Although this latest hike marks a marginal increase, we note that AMT has increased its dividend 20 times in the last five years, and the five-year annualized dividend growth rate is 16.63%. This is attractive to income investors and represents a steady income stream. Check American Tower’s dividend history here.

American Tower’s extensive and geographically diversified communication real estate portfolio is expected to significantly benefit from increased capital spending by wireless carriers. Incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions are likely to push up the spending levels of wireless carriers.

Between 2012 and 2022, AMT’s revenues from the property segment and adjusted EBITDA witnessed a CAGR of 14.1% and 13.4%, respectively. Despite a challenging macroeconomic environment in the current year, management projects property revenues and adjusted EBITDA to increase 2.7% and 4.1%, respectively, at the midpoint.

Moreover, American Tower’s current payout ratio is 63%. Looking at the company’s AFFO growth and payout ratio, it is likely to be able to sustain the hiked dividend.

Bottom Line

The abovementioned disbursements demonstrate American Tower’s operational strength and commitment to 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 payouts to bet their money on, solid dividend payouts are arguably the biggest enticements for them. However, customer concentration is high for American Tower. Also, a high-interest rate and stiff competition in its industry for new businesses and asset acquisitions add to its woes.

Shares of this Zacks Rank #3 (Hold) company have declined 6.4% over the past three months, narrower than the industry's fall of 8.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the REIT sector are Rexford Industrial Realty REXR and Stag Industrial STAG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Rexford Industrial Realty’s long-term growth rate is projected at 10.6%. The Zacks Consensus Estimate for REXR’s 2023 funds from operations (FFO) per share of $2.19 suggests an 11.7% year-over-year increase.

The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share of $2.25 indicates a 1.8% year-over-year increase.

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

American Tower Corporation (AMT) : Free Stock Analysis Report

Stag Industrial, Inc. (STAG) : Free Stock Analysis Report

Rexford Industrial Realty, Inc. (REXR) : Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research