American Tower: Great Long-Term Story

Apr.22.14 | About: American Tower (AMT)

Summary

Global demand for personal mobile devices will continue to grow significantly.

No new technology in sight to replace towers as means of relaying cell phone and other personal device signals.

Virtual local monopoly status once a tower is owned. Only a few major global players in this market. High barriers to entry, excellent cash flow.

American Tower (NYSE:AMT) is a leading player in the global cell tower market. Given that global demand for personal mobile devices continues to grow, the need for and use of towers to relay their signals will also continue to grow and probably for many years to come. So, the demand side of the equation appears to be very robust. Additionally, given the high capital investment required and commonplace local community resistance to additional towers, the barriers to entry are high.

There does not appear to be any near-term technology replacement for the tower solution. As such, the future revenue streams and pricing power appear to be safe.

American Tower is one of only a few major global players in this market and there is still tremendous growth opportunities internationally where tower deployment has been slower to evolve. Further, AMT recently converted to a REIT structure making the future distributions more tax advantaged. Over time, one would expect the payout to increase as the business has a very strong cash flow and eventually acquisitions will slow and then payouts can increase substantially. So, this story has both growth and high dividend yield potential.

Ian Mausner - Senior Portfolio Manager

Comprehensive Investment Advice and Strategy

Disclosure: I am long AMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.