While stocks that are currently giving high yields are a good investment for the short term, most serious investors like to balance their portfolio with some solid long-term investments. These are the ones that are predicted to continue giving steady payouts over the next decade or more. When deciding on which companies to invest, it is important to look into their past, analyze their current situation, and consider the predictions of financial experts about their future. One company that you should consider adding to your portfolio is American Tower (NYSE:AMT). Here is a loo at what makes American Tower a solid long-term dividend stock. American Tower owns and operates broadcast and wireless communications infrastructure. Although it is headquartered in Boston, Massachusetts, it has offices worldwide and operates in several countries. The company was founded in 1995, and it was originally a unit of American Radio Systems. When American Radio Systems merged with CBS Corporation in 1998, American Tower was spun off as a separate company.
It then merged with SpectraSite Corporations, Inc. in 2005, and this secured their position as one of the largest tower owner and operators in North America. This company has more than 170,000 sites in 16 countries. The size of this company and its position in the market are some of its strengths. It is a company that is well-established in the communications industry, and it was named as a Fortune 500 company by Fortune magazine for the first time in 2017, says Wikipedia. This is a positive element for those considering investment as it shows that the company is currently in a good position. American Tower has also expanded globally, especially between 2007 and 2012 when it experienced significant growth. During that period, the company focused on international growth and added operations in Peru, Chile, India. South Africa, Uganda, and Ghana. They then merged with Global Tower Partners in 2013, and this added Panama and Costa Rica, along with additional sites in the United States to their portfolio.
This international presence is another factor in American Tower’s favor when considering a long-term investment. It means that the company has spread its interests wide enough to cover any potential problems in one location. Of course, the dividend payout history of a company and its predicted dividend payouts are an important factor to consider when deciding whether to invest or not. Compared to many other big companies that attract long-term investors, American Tower only has a short dividend payout history. Seeking Alpha notes that American Tower has only a 10-year history of dividend payouts. However, it is worth noting that the dividends have increased for the last seven years consecutively, which is a good sign. Taking a closer look at the potential yields from investing in this company, the total return makes this company a good investment. Between the beginning of 2015 and the second quarter of 2019, the company has a total return of 125.8 percent. This means it is well suited to total return investors, and it will give them a steadily increasing income.
On the downside, American Tower has a dividend yield of just 1.7 percent, which is a below-average dividend yield. However, the consistent increases over the last seven years should allay an investor’s fears about potential lead and make it a good investment option for dividend growth investors. This company has also shown that its business is showing good growth. This was evident at the last dividend increase in May 2019 when American Tower increased the dividend by $0.02, which is the equivalent to a 2.5 percent increase since the March 2019 increase. This was the 29th consecutive quarterly increase. Another aspect of the company to look at is its potential for growth. Communications is an industry that is growing and diversifying rapidly. One reason for this is that there is an increasing need for greater streaming capacity. For these reasons, the projected growth potential of American Tower stands at six percent.
However, there are some financial analysts who are even more optimistic about American Towers’ potential for growth because of the implementation of 5G. There are some who estimate the company could experience growth as high as eight percent over the next few years. It is predicted that American Tower will invest in its 5G expansion and will also continue to grow the business by buying bolt companies. The payout ratio in comparison to profits is another factor to consider when considering an investment. Simply Wall Street says that over the last 12 months, American Tower has paid out 43 percent of their profits in dividends. This is a medium payout ratio that strikes a good balance between paying dividends to investors with retaining enough of the profits to invest in and expand the business. This also leaves some room to increase the dividend payout ratio in the future.
Generating enough cash to payout dividends is also important. This REIT paid out 36 percent of its free cash flow in dividend over the last year. This is a rather conservative figure, so there is potential for greater payouts in the coming years. Simply Wall Street also notes that American Tower has grown its earning per share at 17 percent per annum consistently over the last five years. The fact that the earnings per share are growing and American Tower is paying out less than half its earnings in dividends is an attractive combination. Overall, it seems that this is a solid long-term dividend stock for investors to consider adding to their portfolio as all the indicators are good. American Tower is in an industry that is predicted to experience good growth, and they have towers and offices around the world. Although they only have a short dividend payout history, they already have a good track record for increasing their dividends. Financial experts predict that this is a trend that should continue over the coming years. Therefore, this company is a good dividend stock option for both total return investors and dividend growth investors.
Written by Bill Vix
Read more posts by Bill Vix