Growth and income generally don't go hand in hand. As a rule, companies that are in growth mode are plowing excess cash into expanding the business and making investments. Companies that are at maturity (in other words, growing with the economy) often throw off cash and distribute it to shareholders either via dividends or buybacks.

If you're looking for an investment that combines income and growth, start with a real estate investment trust (REIT) -- these companies must distribute most of their earnings as dividends no matter how strong their sales are. One growth stock that also pays a decent dividend is cellphone tower REIT American Tower (AMT -1.16%).

Picture of a cell phone tower

Image source: Getty Images.

Recurring revenue growth from established clients

American Tower is one of the largest owners, operators, and developers of multi-tenant communications real estate. Its customers include the big wireless operators -- AT&T, T-Mobile, and Verizon accounted for about half of the REIT's 2020 revenue. The company also leases to radio and television broadcast companies, governments, and other clients.

While most urban areas are saturated with cellphone coverage, demand for mobile data keeps increasing at a steady clip. Right now, the company is working with the densification of 4G and is in the early stages of building out for 5G. Luckily for American Tower, it believes that its towers that are operating at near capacity can be upgraded to handle more data with a modest capital investment. 

American Tower's current net operating income yield on its U.S. properties is 11.5%, which shows what a great business these towers are. The older towers (10 years or more) are generating 20%, which gives the company a base of steady, recurring revenue. Given the company's view that it will require only a small investment in its towers to upgrade them for 5G, much of that additional revenue will fall to the bottom line.

Mobile data usage will continue to grow rapidly

On the earnings conference call, CEO Tom Bartlett laid out the big growth opportunity. The average U.S. smartphone user currently consumes about 15 gigabits of data per month, and American Tower sees that increasing to 50 gigabits by 2026. This works out to a cumulative average growth rate of 30% per year. The use of mobile conferencing and bandwidth-intensive services are already stressing 4G capacity, and nascent 5G services have yet to really contribute to usage. It may turn out that the company's data usage forecast will be conservative. 

American Tower is forecast to earn roughly $5.22 per share in 2021, which is a 38% increase from the $3.79 it earned in 2020. The Street sees revenue growing 10% to $8.8 billion. At the recent share price around $250, that gives the stock a price-to-earnings ratio of 48 times 2021 earnings, which is certainly pricey for a traditional REIT. But if you look at adjusted funds from operations (AFFO), American Tower earned $8.44 per share in 2020 and expects to earn about $9.27 per share this year, for a more reasonable forward-looking multiple around 27. (AFFO backs out non-cash charges like depreciation and amortization, which are often high for REITs -- that's why AFFO is a better gauge for them than net income.)

Cellphone towers in the U.S. are largely a oligopoly, with American Tower and Crown Castle International the neck-and-neck leaders and SBA Communications a distant third. With long-term leases and high barriers to entry, American Tower has a competitive moat that warrants a higher multiple. 

American Tower also pays a quarterly dividend of $1.24 per share and has hiked its dividend every quarter since April 2012. It is quite impressive and something that dividend investors should keep in mind. At current levels, American Tower pays a 2% dividend yield, and its payout ratio is 54% based on actual dividends and AFFO per share in 2020. This is on the low side for a typical REIT, but that is a reflection of the company's growth opportunities. That is why American Tower is one of those rare growth stocks with a dividend yield.