Picking high-quality stocks is the blueprint for success as a long-term investor. If an investor is able to pick leading stocks in growing industries, it's possible that they may never have to sell many of those holdings.
One stock in my portfolio that I don't anticipate I will ever sell is the communications infrastructure real estate investment trust (REIT) American Tower (AMT 0.58%). Let's dig into the reasons why.
1. It's the undisputed leader in a critical industry
With 54.4% of global web traffic in the fourth quarter of 2021 coming from mobile devices, companies like Verizon (VZ -4.67%) are pivotal to meeting global mobile data consumption. And large service providers depend on American Tower for the infrastructure to send wireless signals to customers. This explains why American Tower is able to secure five-to-10-year initial lease terms with its tenants that come with built-in annual rent increases.
And with more than 220,000 communications sites and more than two dozen data centers throughout the U.S. and 24 other countries, American Tower has established itself as the dominant communications infrastructure REIT. American Tower's current $117 billion market capitalization makes it the largest communications infrastructure REIT in the world. For context, this is much more than the $83 billion market cap of the U.S. pure-play cell tower REIT Crown Castle International (CCI -0.13%).
2. Its business should keep growing
The same factors that led American Tower's adjusted funds from operations (AFFO) per share -- a key measure of REIT performance -- to grow at a 13.8% annual rate from 2011 to 2021 appear to remain in play.
This is because emerging technology like the Internet of Things will likely result in increasing demand within the global cell tower industry. As a result, research firm Verified Market Research expects the global cell tower industry to grow at a 14.5% annual rate from $39.5 billion in 2018 to $114.1 billion by 2026.
Thanks to this promising industry outlook and American Tower's dominance, I expect growth to remain in the low double digits annually in the medium term.
Image source: Getty Images.
3. The dividend is very safe
American Tower also provides investors with a 2.2% dividend yield, which is significantly higher than the S&P 500's 1.5% yield. And better yet, the dividend appears positioned to continue growing.
This is because American Tower's dividend payout ratio was 52.1% in 2021. For a fast-growing stock like American Tower, it's important to retain enough capital to be able to develop and acquire more communications sites to keep pace with demand. It looks like the stock's current payout ratio allows it to do just that. That's why I believe that annual dividend growth at a rate in the teen percentages should persist in the years to come.
This makes American Tower a hybrid play that can give investors high starting income with the potential for strong growth in the future.
A blue chip stock to consider buying
It's difficult to imagine a future where the role of American Tower's infrastructure portfolio declines in importance to the global economy. This is what ultimately makes it a compelling stock to buy and hold for the long haul.
And at a forward price-to-AFFO-per-share of 25.8, shares of American Tower hardly seem to be unreasonably priced. This is because of the stock's exceptionally high growth rate and future growth prospects.
