Investors searching for solid dividend stocks often look at a company’s dividend growth history as a guide to what to expect in the future. A company with a solid dividend growth history proves its ability to generate consistent earnings and gives an investor confidence that the dividend yield could continue to increase over time.
When it comes to real estate investment trusts (REITs), many of the better ones will raise dividends perhaps once or twice per year. But consider one REIT that has demonstrated a superior ability to grow its dividend over time by remarkably increasing its dividend quarter after quarter.
American Tower Corp. AMT is a Boston-based specialty REIT that calls itself “a global leader in wireless infrastructure.” Founded in 1995, American Tower owns, operates and develops wireless and broadcast communications real estate. Most of its business is leasing space on wireless and broadcast towers.
American Tower has a presence in 225,000 global communication sites across 26 countries on six continents. About 43,000 of those properties are in the U.S. and Canada, and approximately 180,000 are international properties.
If you had invested $10,000 in American Tower five years ago, you would have received 70.259 shares at an initial price of $142.33. The quarterly dividend at that time was $0.75 per share.
Over the last five years, American Tower has increased its dividend for 19 consecutive quarters. In December, American Tower hiked its quarterly dividend to $1.56 per share. The annual dividend of $6.24 presently yields 3.09%.
Your original $10,000 investment would now be worth $15,771.16, for a five-year total return of 57.72%. You would have collected $22.53 in dividends over that time frame and $59.62 in appreciation.
If, like many investors, you prefer to reinvest the dividends, your original 70.26 shares would have grown to 77.97 shares, and your total return would now be 57.46%.
With forward funds from operations (FFO) of $9.79, American Tower’s payout ratio is 63.7%. While that is still considered a safe number to cover the dividend, the payout ratio has risen from about 50% with the last dividend hike.
Fourth-quarter FFO of $2.46 missed analysts’ consensus estimates of $2.52 but was $0.04 better than its FFO of $2.42 in the fourth quarter of 2021. Revenue of $2.71 billion beat the consensus by $30 million and was an improvement over revenue of $2.46 billion in the fourth quarter of 2021.
On March 6, RBC Capital Markets analyst Jonathan Atkin maintained an Outperform rating on American Tower but lowered his price target from $240 to $230. That represents a potential 14.1% increase from present levels.
Over the past 30 days analysts from Raymond James and Credit Suisse have also maintained Outperform ratings on American Tower. While Raymond James’ price target is only $227, Credit Suisse has a price target for American Tower of $244.
While investors should not totally rely on analysts’ ratings nor price targets when making investment decisions, one thing about American Tower is clear: It has a dividend growth history that is the envy of its peers and one that has substantially increased the wealth of its investors over the past five years.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
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