American Tower Corporation AMT rewarded its investors with a 2.1% sequential hike in the quarterly dividend on the company’s common stock, increasing it to $1.43 from the $1.40 paid out earlier. The raised dividend is scheduled to be paid on Jul 8 to shareholders of record as of Jun 17, 2022.

Based on the new rate, the annualized dividend rate comes to $5.72 per share, up from the prior annual rate of $5.60. This indicates an annualized yield of roughly 2.45% considering American Tower’s closing price of $233.25 on May 19.

Can American Tower Maintain Its Payout?

AMT has a disciplined capital-allocation strategy and has consistently increased its dividend since 2012. 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 is likely to be able to sustain the hiked dividend.

Its consolidated adjusted funds from operations (AFFO) witnessed a CAGR of 15.3% over the last 10 years (ended 2021). The healthy trend is expected to continue in 2022, with the consolidated AFFO projected in the range of $4,705-$4,815 million, implying a year-over-year midpoint expansion of 8.8%, promising rewards for investors in the upcoming period. American Tower’s current payout ratio is 54.05%, lower than the industry average of 61.33%.

The advancement in mobile technology and the proliferation of bandwidth-intensive applications are propelling growth in mobile data usage globally. Therefore, with an extensive and geographically diversified communication real estate portfolio, American Tower is well-poised to benefit from the increasing capital spending by wireless carriers in 5G deployments and the future deployment of additional spectrums.

AMT is also strengthening its portfolio through acquisitions. In December 2021, American Tower completed the CoreSite acquisition. This offers American Tower the opportunity to capitalize on the latter's highly interconnected data center facilities and critical cloud on-ramps.

Bottom Line

Such 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 payments to bet their money on, solid dividend payouts are arguably the biggest enticements for them.

Shares of this Zacks Rank #3 (Hold) company have rallied 2.1% over the past three months against the industry's decline of 5.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Key Picks

Some key picks from the REIT sector include Prologis, Inc. PLD, Public Storage PSA and Extra Space Storage Inc. EXR.

Prologis holds a Zacks Rank of 2 (Buy) at present. Prologis’ 2022 revenues are expected to increase 9% year over year.

The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised 1.8% upward in the past month to $5.15.

The Zacks Consensus Estimate for Public Storage’s 2022 FFO per share has moved a cent north to $15.54 over the past month.

Currently, Public Storage carries a Zacks Rank of 2. PSA's long-term growth rate is projected at 7.1%.

The Zacks Consensus Estimate for Extra Space Storage’s 2022 FFO per share has moved marginally north to $8.01 in the past month.

Extra Space Storage's 2022 revenues are expected to increase 15.6% year over year. Currently, EXR carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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