Communications real estate investment trust (REIT) American Tower (AMT 0.59%) has had a tough year. Macroeconomic pressures are weighing on the company and as a result, this top-tier stock sits down more than 18% in the past year. 

Does today's discount make this leading REIT a buy right now or is it a stock to steer clear of for the time being? 

What's going on with American Tower

Despite headwinds last year, American Tower finished strong in 2022. The REIT, which owns and leases roughly 225,000 communications assets ranging from cellphone towers, antennas, and data center facilities around the globe, saw revenue rise 14.5% while its adjusted funds from operations (AFFO) a key financial metric for REITs, rose by 7.1%.

Strong leasing momentum and the acquisition of data center REIT CoreSite at the end of 2021 gave earnings a boost last year. However, its forecast for 2023 doesn't look as encouraging. Its net income in the fourth quarter and the full year for 2022 was down by double-digit percentages. And the company predicts its AFFO for the full year will decline from last year. These losses are thanks to rising interest rates impacting its cost of borrowing.

Because REITs such as American Tower pay out almost all earnings as dividends, as required by law, they rely heavily on debt to expand their portfolio of real estate assets. Most times, this debt is a fixed-rate loan with a set interest rate. But American Tower has a high proportion of floating debt (22%) which means its interest rates change immediately as rates rise or decrease. 

From 2021 to 2022 the federal funds rate rose from nearly 0% to 4.75% -- the highest and fastest rate increase in history. And rate hikes aren't over yet. Economist have predicted that rates could rise to 5.75% by the end of 2023, which dramatically raises the REIT's cost of borrowing. 

Is the company a buy right now?

American Tower has done a good job addressing this issue, lowering its exposure to floating rate debt by 9% last year and reducing its overall debt ratios. However, rising rates will undoubtedly continue to weigh on the company and likely lead to a dismal year for earnings. But that doesn't mean investors shouldn't still consider the stock a long-term buy.

Demand for its assets remains strong. The adoption of 5G technology is helping drive organic revenue growth, with tenant billings forecast to increase about 5% across its global markets in 2023. And it still has a large number of international markets rolling out 5G in the coming years. It also benefits from a steady increase in data usage on mobile devices. Research estimates cellphone data usage could grow at a compound annual growth rate (CAGR) of between 12.6% and 19.6% during the next five years depending on the national market.

Right now, its price-to-AFFO ratio (a metric that works similarly to earnings per share) is about 20 times forecast 2023 AFFO. That's a bit steep considering its high floating rate debt exposure and forecasts for 2023. But I don't think it's unreasonable for a company with American Tower's historical performance, high yield, or long-term growth opportunities.

AMT Dividend Chart

AMT Dividend data by YCharts

The REIT has increased its dividend payouts every quarter for the past 10 years, working out to a 500% increase. Normally its yield is about 2% or less, but its beaten-up share price as of late has pushed its dividend yield to a historical high of more than 3%. Even with its slight decrease in FFO, I believe its track record of increases will continue this year as its dividend yield is well covered (making up 67% of its AFFO).

I believe investors should take a long-term approach to investing, looking at the bigger picture of the company and the role it plays in a high-demand industry. The next year will likely bring lackluster results, but its long-term outlook still looks healthy. For that reason, I believe the stock is a solid buy for patient investors.