Financial analysts are highly optimistic about the future of American Tower (NYSE:AMT), and everyday investors have every reason to agree with their assessment.
The company is best described as a real estate investment trust that has strategically secured cellular network towers in the United States and throughout the world. The company leases these spaces to wireless service providers.
American Tower was founded in 1995 before wireless technology exploded in popularity. The company’s stock has steadily climbed since being listed on the NYSE in February of 1998, currently priced around the $130 mark.
Do not be scared away by the fact that AMT is approaching its 52-week high of $132 and change. This company is an absolute superstar that will be raking in the cash for decades.
Why American Tower is a Must-Buy
As time progresses, people are using more and more data with mobile devices. From smartphones to tablets, laptops and other gadgets, the masses have clearly hopped on the wireless bandwagon. This trend will likely continue for years, if not decades or centuries, into the future.
American Tower is strategically positioned to benefit from increased data usage. The company has scooped up plenty of cellular network towers. Wireless service providers pay American Tower a fee to use these towers for data transmission purposes.
It does not take a tech genius to understand that smartphones have become ubiquitous. These little screens will likely be used far into the future. Even if the smartphone is eventually replaced, the device that takes its place will likely require wireless towers in order to function in unison with the Internet. American Tower is in the catbird seat to benefit from this perpetual data usage. The company has amassed extensive ownership of the wireless tower infrastructure necessary to support an ever-growing demand for data.
The Rise of Data
Take a moment to consider the remarkable amount of data used by those who own web-enabled mobile devices. A whopping 13.75 exabytes (equating to 13.75 trillion megabytes) of data traffic occurred in the United States in 2016. This figure represents more than three times the amount of data used in the United States in 2014.
American Tower executives estimate data traffic in the United States will jump to an astonishing 34.8 exabytes by the time 2020 rolls around. This incredible spike in data will be spurred by the implementation of 5G wireless service.
The inevitable increase in data usage means wireless carriers must install more equipment for network support. This hardware is mounted to towers like those owned by American Tower. The company has more than 40,000 sites in its United States portfolio. Organic tenant billings growth hit 6.5 percent in the most recent quarter. This is the best growth rate the company has experienced since Q2 of 2015.
Pacific Crest Securities has predicted American Tower’s domestic growth will increase by 6.5 to 7 percent through 2018.
American Tower does not restrict tower space to a single client. Rather, the company’s executives have prudently leased to multiple tenants. Add in the fact that American Tower is expanding throughout the developing world, and it is easy to understand why investment analysts are bullish on this stock.
Data usage is exploding throughout the entire world. In fact, much of the developed world lacks wired connections. As a result, the wireless towers provided by American Tower prove that much more important and valuable. Company executives are pouring capital into overseas markets where broadband penetration is still in development and wireless penetration is high. Cell phone towers are especially profitable in these markets.
The Icing on the Cake
American Tower enjoys considerable levels of recurring revenue. The company has minimized its obligations for maintenance capital. This means American Tower consistently generates free cash flow that is put right back into the hands of you, the investor. The company even provides a dividend payment to investors.
Though the dividend isn’t exactly sky-high, the payout has increased by over 180 percent in the past half-decade. At the moment, American Tower’s dividend is 1.93 percent.
A Conservative Play That Will Pay Off
In the end, you won’t have trouble finding a sexier high-tech investment to park your money. However, few tech companies boast the rock-solid business plan and strategic positioning of American Tower. An investment in American Tower is a safe way to take advantage of the meteoric rise of data across the globe.
Buy American Tower, hold it for at least a couple years and you will undoubtedly make money.
Regards,
Ethan Warrick
Editor
Wealth Authority
