At the stroke of midnight Dec. 31, 2011, American Tower (NYSE: AMT) gave its stockholders a big ole New Year's kiss as it turned itself into a dividend lover's favorite investment: a real estate investment trust. Why are REITs so desired by income investors? Because, by law, a REIT is required to pay out 90% of its earnings in dividends. The payback for the company is in the form of tax benefits.
This REIT morphing process began last May, when the American Tower board of directors voted to approve the changeover. The final go-ahead was given by shareholders' vote at the end of November. To make the transition to REIT legal, the company was required to distribute to shareholders up to $200 million in undistributed earnings by the end of the year. This it did to the tune of $0.35 per share.
Around the time of that shareholders' vote, American Tower CEO Jim Taiclet said the company would start quarterly dividends in early 2012, which would add up to about $0.80 to $0.90 per share for the year. At Thursday's opening price of $58.91, that would be a yield of between 1.36% and 1.53%. That's a far cry from the high-flying mortgage REIT yields, such as Annaly's 14.1%, or Chimera's 17%. But it would be light-years ahead of the yields of American Tower's major wireless tower owning competitors, Crown Castle International (NYSE: CCI) and SBA Communications (Nasdaq: SBAC), which would be zero.
Some other comparisons:
|
Company |
Forward P/E |
Market Cap |
Revenue Growth Quarterly (YOY) |
Operating Margin (TTM) |
Earnings Per Share (TTM) |
|---|---|---|---|---|---|
| American Tower | 42.9 | $23.6 billion | 22.8% | 37.5% | $0.69 |
| Crown Castle International | 54.6 | $12.8 billion | 6.6% | 33.4% | $0.49 |
| SBA Communications | N/A | $4.7 billion | 10.7% | 14.0% | ($1.21) |
Source: Morningstar. YOY = year over year; TTM = trailing 12 months.
Given the world's increasing reliance on mobile broadband, the growing pressure of 4G network competition among U.S. carriers, and the infrastructure build-out potential in the developing world, it seems there will be plenty of growth opportunities for wireless tower companies in the coming years. But American Tower is the tower company that I would put my money on in this industry. And with it going REIT, it comes out looking even better. I'm giving American Tower a thumbs-up in CAPS.
REITs can be good dividend producers, but don't overlook these sold income earners.
