Published on 9 Oct 2023 on Zacks via Yahoo Finance
American Tower Corporation’s AMT extensive and geographically diversified communication real estate portfolio positions it well to ride the growth curve amid the rise in capital spending by wireless carriers on the incremental demand from global 4G and 5G deployment efforts. Its expansionary efforts and disciplined capital-allocation strategy augur well for long-term growth. However, customer concentration and high interest rates pose key concerns for the company.
What’s Aiding It?
With the advancement in mobile technology, such as 4G and 5G networks and the proliferation of bandwidth-intensive applications, mobile data usage has increased significantly globally. The excessive usage of network-intensive applications for video conferencing, cloud services and hybrid-working scenarios fueled the rise.This has led to greater capital spending by wireless carriers on the back of incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions, aiding demand for AMT’s wireless communication infrastructure. This upbeat trend is likely to continue in the upcoming period, boosting demand for the company’s assets and driving healthy leasing activity.AMT has a resilient and stable business model. It generates most of its revenues from non-cancellable, long-term (typically 5-10 years) tower leases with major wireless carriers and has multiple renewal period options. This assures stable revenue generation for the company.To capitalize on the secular trends of the industry, the company is consistently focusing on macro-tower investment opportunities and expansionary efforts across global markets. It has built more than 45,000 international sites since it began expanding internationally. Around 8,000 of these sites have been built in Africa as carriers continue to invest in their network coverage and densification needs.In the six months ended Jun 30, 2023, AMT purchased 68 communications sites, as well as other communications infrastructure assets, in the United States, Canada, France, Poland and Spain.This real estate investment trust (REIT) maintains a healthy balance sheet with ample financial flexibility. It exited the second quarter of 2023 with $8.2 billion in total liquidity and a net leverage ratio of 5.3. The company also enjoys investment-grade credit ratings of BBB- and Baa3 with a stable outlook from Standard & Poor’s and Moody’s, respectively, rendering it access to the debt market at a favorable rate. With a solid financial footing, AMT remains well-placed to bank on long-term growth opportunities.Solid dividend payouts are arguably the biggest enticement for REIT shareholders and American Tower remains committed to that. This September, the company announced a 3.2% hike in its quarterly dividend on its common stock to $1.62 per share from $1.57 paid out earlier. Moreover, in the last five years, AMT has increased its dividend 19 times and its five-year annualized dividend growth rate is 15.10%. Such efforts boost investors’ confidence in the stock.