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American Tower Corporation: Potential For Double-Digit Returns Ahead

Mar. 02, 2021 10:18 AM ETAmerican Tower Corporation (AMT) Stock49 Comments


  • American Tower is a resilient REIT with a unique asset base able to generate incredibly secured cash flows.
  • The company enjoys positive growth catalysts ahead, including growing its tower base and realizing contractually-secured rental escalations.
  • The current dip in AMT's stock price presents an attractive dividend growth opportunity, with the potential for double-digit returns and a healthy margin of safety.
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Elevator Pitch

Around seven months ago, we covered American Tower Corporation (NYSE:AMT), explaining why the stock remained attractively priced, with great total return prospects despite its (then) prolonged rally. Over this period, shares have slid lower by around 16.5%, underperforming the rest of REITs along with the overall market.

Source: Author

Despite that, the company has continued delivering a resilient performance, with great growth prospects and a robust margin of safety due to its essential-to-communicate assets.

With shares slipping lower, we believe that American Tower presents a compelling investment opportunity, especially towards dividend growth investors in the current yield-less world. Hence, we propose that AMT's current price levels make for a great spot to average down or even initiate a position, projecting double-digit returns ahead.

A resilient company

The main characteristic that differentiates cell-tower REITs like American Tower from the rest of its REIT peers is their resilient business model. The unfortunate pandemic caused many issues in the sector, especially on retail properties. In the meantime, the pandemic had almost no effect on American Tower, with every single of its past four quarters delivering positive rental revenue growth.

American Tower owns nearly 43,000 sites in the U.S. and more than 140,000 sites internationally. The company enjoys long-term tenant lease contracts, which are typically non-cancellable, have an initial term of 5-10 years, while embedded in them are above-inflation annual lease escalations, which secure growth in real terms.

Source: Supplemental data

Additionally, AMT is able to organically expand its gross margins since attaching additional tenants to its towers requires little to no additional expenses but scores additional recurring cash flows. Here is an example of how growth in its per-tower tenants contributes to the company's financials in the U.S.

Source: Overview Presentation

Unlike other REITs, whose tenants can move, go out of business, etc., American Tower's

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This article was written by

Nikolaos Sismanis profile picture

Nikolaos Sismanis holds a BSc in Banking and Finance and has over five years of experience as an equities analyst. He covers a variety of growth stocks and income stocks, including identifying those with the highest expected return potential, and a solid margin of safety.

He is a contributing author to the investing group Wheel of Fortune where they share actionable trading ideas across all asset-classes, sectors and industries. The goal of the service is to provide a one-stop-shop for investment and portfolio ideas, while educating the vibrant community of subscribers. Features of the service include: the Funds Macro Portfolio (only ETFs and CEFs) for less active investors, the Single Macro Portfolio (single equity focused) for more active investors, educational content, and a live chat room to openly discuss ideas with like-minded investors and The Fortune Teller. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (49)

held up VERY well in today's obliteration! looks like the bottom is in.
It keeps dipping, I keep nibbling
I’ll be waiting for the top insiders and institutions to stop selling and start acquiring the stock. To much insider selling at present to turn me positive.
@Earno What source are you using for this info? Seems like insider shave bought 12x more shares than they sold in the past 3 months no? Looks like insiders are bullish after this pullback too :D www.nasdaq.com/...
5ofDiamonds profile picture
Both $AMT and $DLR at decent price now. I nibbled $AMT today.
02 Mar. 2021
Have been in since 217 a little while back and 216 now. Should have waited but didn't think it was going to 210.

AMT seems to have great leadership and pretty open on the Sprint Churn in their last quarterly end of year conf.

Also, they are part of the investment with AST which I like and am watching as NPA keeps going up and waiting until I think June now to go full IPO. Everything they are doing makes sense to me and their position outside the U.S. is growing.
Jamjack profile picture
Spot on. I think you are right. AST investment is not fully appreciated by the investment community. They want participation. AMT not going to sit still. Long NPA as well.
dlr.rrx_00 profile picture
Currently earning %11 on original investment. Not bad
Nikolaos Sismanis profile picture
@dlr.rrx_00 Enjoy your dividends! :)
Bitzap profile picture
How many in the world are staring at this chart:


and wondering whether that decade-long support line holds?
Nikolaos Sismanis profile picture
@Bitzap Very interesting! I hadn't noticed the support trend, thanks for sharing!
@Bitzap Looks supportive to me! Wish I'd noticed it early haha but there's just so many things to pay attention to xD
Financially Challenged profile picture
Be interested to know how much of the growth is predicated on “ 5G densification “?
Been in AMT since late 2017, been very happy with it. My brokerage automatically applies cash to underweight positions, so been buying a fair bit of it the last couple of months with other dividends that come in and my contributions.

Good point on the increasing payout ratio and slower AFFO growth, now I have a better idea of what to expect going forward. 20%+ dividend growth per year wasn't going to last forever obviously, but a gradual stepping down to 10-15% is still fine in my book. I like the international exposure, as those should help them maintain a good growth profile over their US counterparts.
Nikolaos Sismanis profile picture
@Chalmus0 Thank you for reading! Always good to see someone referencing a point in the article :)
cyrano13 profile picture
Vantage Towers IPO will soon give us below 200 entry to AMT
AMT is very expensive, over 10x rev. In addition they’re technology can be replaced by more innovative technology. Cell technology is very old technology.
Bitzap profile picture
@tzeilbe Agreed, IPoAC will displace cell technology pretty soon.
@Bitzap super hard to make sure packets arrive in the correct order with that though. I've been working with my birds on trying to perfect it, but still a ways off
Bitzap profile picture
@Chalmus0 you're doing it wrong -- just add a sequence number to messages sent and reorder on arrival.
roth1979 profile picture
I like the business, but literally 9 months of falling stock price makes AMT a hard pass for me.
@roth1979 ...you realize that that is what makes the stock an attractive buy right now though, right? Healthy business, growing at double digits, and now at reasonable or better price
@roth1979 The company fundamentals haven't changed a bit. They continue to grow their dividend by 20% annually!!! They have large margins and can organically grow those margins as explained in the article. Revenue and AFFO is strong. AMT is a buy!
roth1979 profile picture
@dgi123 So what is greater, the 20% dividend growth or the 19% decline in share price?
I am currently slowly building a position in AMT.

Here is AMT CFO at MS Tech conference as per SA transcript "We, once again, will expect to grow the dividend and grow at double digits by about 15% in 2021."
Kinabalu profile picture
@RetireOnDividend Yeah but at the same conference they show a slide that has AFFO/share growing at only 8.5% in 2021.
I keep checking on this and it keeps falling. Same for CCI. High leverage with rising rates? Is that the reason for the stock price sinking?
Nikolaos Sismanis profile picture
@tlapp Cell-towers had run wild over the past few years. I think it's mostly a valuation correction. The long-term story remains intact imho.
jgrever621 profile picture
Long AMT with a full position and DRIPing. As a DGIer, AMT offers rising dividends, which I reinvest regularly.

Rather pleased to see a lower share price at the moment; means I get more shares along with a rising dividend.
Nikolaos Sismanis profile picture
@jgrever621 Enjoy your share accumulation! Thanks for stopping by :)
missing their AFFO expectations by 6c has caused this lower range to be realized. shorter term, may see lower prices. longer term, no question that this is golden.

any insight into the AFFO miss? merger of T-Mobile/ Sprint cause some lower rent? Please elaborate.
Nikolaos Sismanis profile picture
@rchabra The merger has caused an increased churn rate, but this is priced in the company's guidance and our estimates.
Gainz Burger profile picture
I’ve been watching $AMT for a while- may be the time to pull the trigger on this one.
Jamjack profile picture
I think your patience is well rewarded. I can't believe it is below 210. Long AMT.
Nikolaos Sismanis profile picture
@Gainz Burger It definitely looks like one of those "buy the dip" opportunities that don't last very long ;)
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