American Tower Corporation (AMT - Free Report) has announced a 3.6% sequential hike in the quarterly cash dividend. The company will now pay a dividend of $1.14 per share, up from $1.10 paid out in the prior quarter. The increased dividend will be paid out on Oct 16 to shareholders of record as of Sep 28, 2020.
Based on the increased rate, the annual dividend came to $4.56 a share, resulting in an annualized yield of about 1.8%, considering the company’s closing price of $248.38 on Sep 10.
Is the Dividend Hike Sustainable?
American Tower’s ability to sustain the hiked dividend depends on funds from operations (FFO) growth and payout ratio. The company’s current payout ratio is 50.9%, lower than the industry’s 72.2%.
Additionally, its performance depicts a robust funds from operations (FFO) picture. Over the next five years, its FFO is projected to grow at a rate of 14.4%.
The company also has a robust operating platform and ample liquidity to support the dividend payment. Its consistent adjusted EBITDA margins and revenue growth as well as favorable return on invested capital indicate the strength in its core underlying business and support its ability to manage its near-term obligations.
In fact, as of the second-quarter end, its net leverage ratio was at 4.8. Further, in July, the company’s liquidity position (on a pro-forma basis) was $5.1 billion, after executing certain refinancing activities. Finally, as of the second-quarter end, it enjoyed investment-grade credit ratings of BBB-, BBB+ and Baa3 as well as a stable outlook from Standard & Poor’s, Fitch and Moody’s, respectively.
These indicate that the company’s dividends are well-covered and it will be able to sustain its current hiked dividend.
American Tower remains committed to increasing shareholder value through dividend hikes. The company has consistently increased its quarterly dividends since 2012. In fact, its average annual dividend per share has witnessed growth of more than 20% since 2012. Moreover, in May, the company announced a 1.9% sequential hike in quarterly dividends to $1.01 per share.
We believe that such disbursements highlight the company’s operational strength and commitment toward rewarding shareholders handsomely.
As investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to bet their money on, solid dividend payouts are arguably the biggest enticement for REIT investors, especially in the current challenging environment when numerous REITs have slashed or suspended dividend payouts. Also, such moves boost investors’ confidence in the stock.
Shares of this Zacks Rank #3 (Hold) company have gained 15.3% as against its industry’s decline of 8.4% over the past year.
Stocks to Consider
Alpine Income Property Trust, Inc.’s (PINE - Free Report) FFO per share estimates for 2020 have been revised 4.4% upward to $1.18 over the past week. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Duke Realty Corporation’s (DRE - Free Report) Zacks Consensus Estimate for 2020 FFO per share has been revised 3.5% upward to $1.49 over the past two months. The company currently carries a Zacks Rank of 2 (Buy).
Sabra Healthcare REIT, Inc.’s (SBRA - Free Report) FFO per share estimates for the ongoing year have been revised 4.9% upward to $1.72 over the past month. The company currently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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