American Tower (AMT), the biggest U.S. owner of cellular phone service towers, is no longer just a stalwart tech play in its own industry. It’s now a rip-roaring real estate investment trust (REIT) too.
American Tower already produces the best financial performance of the big three tower owners. Crown Castle International (CCI) and SBA Communications (SBAC) are the other two. Now its conversion to a REIT makes American Tower the only one of the three to offer a dividend.
The three companies have the same business model, owning towers and leasing space on them to mobile carriers such as AT&T (T) and Verizon (VZ) through long-term contracts with rents that rise between 3 percent and 5 percent a year.
But American Tower does it more profitably than its peers, according to Morningstar. Its operating margins and revenue-per-tower numbers are superior to those of Crown Castle and SBA. It also has the lowest exposure of the three to weak portions of the mobile network.
As for the dividend resulting from American Tower’s conversion to a REIT, the company expects it will amount to between 80 and 90 cents a share this year. If that proves accurate, the yield will be about 1.3 percent.
That’s just icing on the cake, given that the stock has produced an annualized total return of 31 percent over the past three years, including a single dividend payment in December.
More towers coming
Standard & Poor's analyst James Moorman has a five-star buy rating on American Tower shares. “AMT is the market leader in the wireless tower industry, and we think further tower purchases will enable it to continue to achieve greater economies of scale,” he writes.
“We believe the network upgrades to 4G will provide an additional revenue boost over the next several years.”
In the third quarter, the company’s operating income registered $228.3 million, up 7 percent from a year earlier. Revenue jumped 22.8 percent to $630.4 million.
The company next reports earnings Feb. 23.
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