My Top Wireless Pick for 2012

Now that 2011 has passed away and 2012 is upon us, worth evaluating the stocks you own and are interested in. Should you buy? Sell? Hold? Ignore? Today, we'll put these questions to American Tower (NYSE: AMT  ) , a Motley Fool Rule Breakers recommendation that enjoyed a 16% rally last year.

American Tower operates an expanding worldwide network of skyscraping towers that host radios for broadcasting cellular and broadband signals across metropolitan areas. At Rule Breakers, we believe rising usage of the Internet in the developing world will create demand for more wireless infrastructure. Recent expansion in Africa and India, among other regions, speaks to this trend.

Forecasts for American Tower

Median Target Stock Price $67.58
Fiscal 2011 EPS Estimate $0.84
Fiscal 2012 EPS Estimate $1.43
Expected Annual Earnings Growth, Next 5 Years 22.13%
Forward P/E 75.20
CAPS Rating (out of 5) ***

Source: Yahoo! Finance.

How will 2012 go for American Tower?
Analysts are expecting outrageous growth in 2012. Earnings are expected to improve 70% on a 14% increase in revenue. While that's a bigger delta than we've seen in recent years, it's not uncommon for American Tower to grow profits faster than sales. Either way, the company is on pace to grow nicely.

Yet growth isn't the only factor contributing to investors' enthusiasm for the stock. As of Dec. 31, American Tower became a real estate investment trust, or REIT, paying out 90% of profits as dividends. Current plans call for paying out between $0.80 and $0.90 a share this year alone, equal to a 1.28% yield in the worst-case scenario.

Outsourcing pressure has also increased worldwide. American Tower recently formed a joint venture with South Africa's MTN to buy all existing towers in the region. The company will pay roughly $89 million for a 51% stake in the JV, known as ATC Uganda. Expect management to close as many similar deals as it can during 2012, for it's the most economical way for American Tower to increase its worldwide footprint.

Expansion could also have a chilling effect on rivals. Neither Crown Castle International (NYSE: CCI  ) nor SBA Communications (Nasdaq: SBAC  ) pays a dividend as of this writing, and only Crown produces about as much cash flow as American Tower. Meanwhile, SBA's balance sheet is creaking under the weight of debt that accounts for nearly all its available capital for investment. More and more, competition for share of this market is looking like a two-horse race.

Interestingly, for as expensive as you might think American Tower to be -- no stock trading for more than 75 times estimated earnings should ever be considered cheap -- it's Crown Castle, trading for 88 times projections, that commands the premium. I'll take the dividend-paying market leader, thanks.

But if you like tech stocks, don't settle for a single pick. Learn more about three other stocks positioned to profit from the rise of smartphones and tablets in a new Motley Fool special report on emerging technology. It's yours free, but only for a limited time, so take a look today.

Click here to add American Tower to My Watchlist for up-to-the-minute Foolish coverage of the stock and your entire portfolio.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

Motley Fool newsletter services have recommended buying shares of American Tower. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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