American Tower Stock’s Outlook Is Bullish on Strong Q1 Results
The stock market sell-off continues, and it doesn’t look like the market has bottomed yet. Analysts keep changing their call for when the market will bottom. (Source: “Big Stock Bears Say S&P 500 Bottom Still Another 700 Points Away,” Bloomberg, May 3, 2022.)
When the stock market eventually bottoms, the biggest winners will likely be the stocks of companies that continued to report strong financial results during the sell-off and whose share prices experienced oversized corrections.
One 5G stock that fits the bill is American Tower Corp (NYSE:AMT). A real estate investment trust (REIT) with one of the largest wireless tower portfolios on the planet, American Tower is part of the backbone of the 5G sector. AMT stock is a top 5G stock I’ve been writing about for a while.
American Tower stock has been providing solid price appreciation to long-term investors. From 2002 to 2021, its share price has risen by a compound annual growth rate (CAGR) of 33.9%.
Moreover, as a REIT, American Tower has to return the vast majority of its earnings to shareholders in the form of dividends. The company has increased its dividend in the last 40 straight quarters. (Source: “Dividend History,” American Tower Corp, last accessed May 25, 2022.)
That means investors have been able to rely on AMT stock for pay raises during a recession, a pandemic, a stock market crash, and periods of geopolitical tension.
Most recently, on May 19, American Tower Corp’s board declared a dividend of $1.43 per share. With a payout ratio of just 68.8%, there’s every reason to believe the quarterly dividend increases will continue.
American Tower stock has been able to provide investors with significant stock market gains and dividend growth because the company continues to expand its international footprint and report fabulous financial results.
Despite its wonderful financial reports and dividend increases, AMT stock has been taking a hit lately, down by 20% year-to-date and 2.5% year-over-year. That’s not entirely surprising, since the entire market has been selling off.
Does American Tower stock have further to fall? Time will tell. As of this writing, shares of American Tower Corp are trading at $234.48 and have tested support at $326.50 and resistance at $245.20.
Chart courtesy of StockCharts.com
About AMT Stock
American Tower is one of the largest global REITs. It has a portfolio of more than 221,000 communication sites, including more than 43,000 in the U.S., Canada, and Mexico. (Source: American Tower Corporation: An Overview: First Quarter 2022,” American Tower Corp, last accessed May 25, 2022.)
More than 97% of the company’s revenue is generated from leasing out its towers, fiber, U.S. data centers, and urban telecommunication assets in some of its international markets.
Three of American Tower Corp’s customers are AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and T-Mobile US Inc (NASDAQ:TMUS).
One of the biggest benefits of owning wireless communication towers is the economy of scale. The tower is already there, so leasing out unused space doesn’t really cost American Tower Corp anything. The return on investment per tower is three percent with one tenant, 13% with two tenants, and 24% with three tenants.
Double-Digit First-Quarter Revenue
In the first quarter ended March 31, American Tower’s total revenue increased by 23.2% year-over-year to $2.7 billion. Its property revenue went up by 22.1% to $2.6 billion. (Source: “American Tower Corporation Reports First Quarter 2022 Financial Results,” American Tower Corp, April 27, 2022.)
The company’s net income in the first quarter of 2022 increased by 7.7% year-over-year to $703.0 million. Its net income attributable to AMT common stockholders went up by 10.3% to $712.0 million, or $1.56 per share.
American Tower Corp’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first quarter increased by 12.8% year-over-year to $1.6 billion.
The company’s consolidated adjusted funds from operations (AFFO) increased by seven percent year-over-year to $1.2 billion, while its AFFO attributable to AMT common shareholders climbed by 6.1% to $1.16 billion.
American Tower Corp’s CEO, Tom Bartlett, commented, “5G is ramping up in the U.S. and Europe today, while 4G coverage and densification initiatives continue to grow in earlier stage markets, and it is clear to us that macro towers will continue to be critical infrastructure for carrier network investments over the next decade and beyond.” (Source: Ibid.)
He added, “We believe our global footprint of distributed communications real estate is well-positioned to capture the benefits of the emerging technological trends, ultimately driving what we hope to be a prolonged period of solid global growth and attractive returns for our shareholders.”
American Tower stock is an excellent 5G stock for investors who are looking for reliable, long-term income and growth.
American Tower Corp has been reporting great financial results and is strategically positioned to benefit from the growing global demand for 4G and 5G telecom towers.
AMT stock is down in correction territory, but it should rebound more quickly than most stocks after the market finally bottoms.