Shares of American Tower (AMT +9.30%) are standing tall today. As of 11:35 a.m. ET, the wireless infrastructure giant was up 8.6% on another company's news.
Image source: Getty Images.
Why a spectrum deal lifts tower stocks
The catalyst here is Space Exploration Technologies (SPCX +1.25%) agreeing to spend $8 billion on a high-quality radio spectrum portfolio.
Private equity firm Grain Management's nationwide patchwork of spectrum licenses in the 800-MHz range sets SpaceX up to create a terrestrial cellphone network. Wireless infrastructure players like American Tower surged on the news, while U.S. and European cell network leaders fell.
The ink is still drying on the Grain portfolio deal, so it's a bit early to speculate how SpaceX plans to implement the phone network. However, it's almost impossible to start a nationwide network in America without American Tower's services.
Furthermore, 800-MHz signals are top-notch communications network material, with long range and good building penetration. American Tower has a ton of existing infrastructure in this category, making it easy to add another tenant.
NYSE: AMT
Key Data Points
Towers win no matter who builds the network
After a weak summer, American Tower's shares are now back to prices last seen in early June.
At the same time, the trailing dividend yield is up to 3.9%, recently reaching an all-time high of 4.4%. Today's price jump pushed the yield down, but American Tower keeps funneling cash flows into its payouts. With or without significant SpaceX lease contracts, American Tower remains an effective income stock for long-term investors.
And the rumor mill is probably on the right track today, so the company should benefit from increased competition and another deep-pocketed customer in the domestic cell service market.
