E American Tower Coproration: Robust Financials

In this article, we will analyze the American Tower Corporation (AMT). The company is the world's largest cell-tower REIT, boasting a market cap of $115 billion.

COVID-19 reminded everyone that not all REIT categories are equally safe, with many retail and office real estate assets struggling to perform.

At the same time, it highlighted the resilience of two other categories: data centers and cell-tower REITs. American Tower Corporation is a cell-tower REIT.

In its latest earnings report, the company reported property revenues and tenant billings growth of 8.6% and 9.9%, respectively, on a constant currency basis, signaling impressive growth, despite the ongoing headwinds. It was only because of FX fluctuations, that the actual revenue growth came in lower, at 1.6%.

The company's financials have been robust. The management’s commitment to shareholder returns is evident in its policy to raise the dividend on a quarterly, instead of an annual basis. In fact, over the last four quarters, the company raised its aggregate distributions by nearly 20%.  The company has attracted institutional investors, including Clearbridge Investments.

Despite foreign exchange curbing its results, management guided for FY2020 FFOs growth of around 4.55%. For context, the company's decade long FFO/share CAGR (compound annual growth rate) has been around 16%, as the demand for global cell coverage has been skyrocketing. We believe that the transition to 5G will further strengthen the need for cell towers, and American Tower is well-positioned to take its piece of the pie.

The company enjoys contractually secured cash flows from all the big telecom players. Unlike traditional real estate, telecom firms are very unlikely to miss on their rental payments, since they have to maintain solid coverage at all times.

This makes not only American Tower, but also all cell-tower REITs safe investments in that respect. However, such security comes at a steep price. The company is currently trading at approximately 31.5 times its FY2020 projected FFOs.

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