Summary
- Shares of communications site-focused REIT American Tower Corporation have been on a tear over the past couple of years.
- Readers should note that American Tower is free cash flow positive.
- Potential downside risks include its large net debt load and operational problems in India.
- Management is expanding American Tower's African operations, extending the REIT's growth runway significantly.
- As of this writing, shares of AMT yield 1.8%.
Image Source: American Tower Corporation – IR Presentation
American Tower Corporation (AMT) is a REIT that focuses on leasing out communication sites to major telecommunication companies. Last year, 88% of American Tower’s U.S. property segment’s revenue was derived from AT&T Inc (T), Verizon Communications Inc (VZ), T-Mobile US Inc (TMUS), and Sprint Corporation (S). That division was responsible for roughly half of its company-wide sales. As of this writing, American Tower yields 1.8% and we are optimistic on its payout growth trajectory due to the REIT’s decent dividend coverage when factoring in its ability to keep tapping capital markets for funds.
With operations in multiple continents, American Tower seeks to capitalize on the global trend of rising data consumption, providing for a longer growth runway. American Tower had almost 171,000 communications sites at the end of 2018, however, we caution that only a sliver of those towers are on company-owned land.
