This is Why American Tower (AMT) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
American Tower in Focus
American Tower (AMT) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 0.13% since the start of the year. The wireless communications infrastructure company is currently shelling out a dividend of $1.21 per share, with a dividend yield of 2.15%. This compares to the REIT and Equity Trust - Other industry's yield of 3.43% and the S&P 500's yield of 1.47%.
In terms of dividend growth, the company's current annualized dividend of $4.84 is up 6.8% from last year. American Tower has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 20.23%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. American Tower's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.
AMT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $9.39 per share, with earnings expected to increase 11.26% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that AMT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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