Aug. 27 at 10:28 PM
American Tower is one of the largest infrastructure REITs in the world, owning approximately 150,000 communications sites across the United States and international markets.
The business model overall is relatively simple.
Wireless carriers such as AT&T, Verizon and T-Mobile lease space on American Tower’s infrastructure to install their communications equipment.
These leases are generally long-term, include contractual rent increases and produce recurring revenue largely independent of consumer spending.
The economics become particularly attractive when multiple carriers occupy the same tower.
Most of the tower’s operating costs are already covered by the first tenant, which is a huge advantage, as this means additional tenants can generate revenue with very little additional expense.
This gives American Tower a scalable business model with high incremental margins.
The primary long term growth driver is the increase in mobile data consumption.
As consumers stream more video and carriers expand their 5G networks, additional equipment must be installed to increase network capacity.
American Tower’s second-quarter results verify this thesis.
Total property revenue increased 6.3% to
$2.69 billion, adjusted EBITDA increased 3.2%, and AFFO attributable to shareholders increased 3.8%.
Management also raised its 2026 outlook, with AFFO per share now expected to reach between
$11.00 and
$11.17.
However, AFFO per share grew only approximately 1% after excluding currency movements.
The largest headwind was customer churn from DISH, which reduced organic tenant-billings growth by approximately 1.7 percentage points.
When the effects of DISH churn and higher refinancing costs are excluded, management estimates that AFFO per share grew by more than 5% on a currency-neutral basis.
AFFO per share is projected to grow at roughly 4.7% annually through the year 2030.
This REIT now yields 4.07%, with very strong dividend coverage with the AFFO payout ratio at just around 65%.
The underlying business is clearly performing better than the headline growth rate indicates.
American Tower also owns CoreSite, a collection of highly interconnected U.S. data centers.
CoreSite’s cash revenue increased approximately 12%, while management raised its full-year data-center growth forecast from 13% to approximately 15%.
CoreSite completed more new leasing during the quarter than it did during all of 2021, with nine of the world’s ten largest AI companies now deployed within its facilities.
This gives American Tower a second growth engine beyond traditional wireless towers.
American Tower trades at a 15.6x AFFO per share multiple, down nearly 50% over the last 5 years.
Its annualized
$7.16 dividend produces a yield of approximately 4.1% and represents around 65% of projected AFFO, leaving the distribution reasonably well covered.
The primary risk that bears would point out is the balance sheet.
Net leverage remains elevated at 4.9 times, making refinancing costs and long-term interest rates significant for future AFFO growth.
They also have around 7% floating rate debt, which isn’t a large amount, but certainly matters in a high rate environment with rates projected to go higher.
Nevertheless, American Tower combines predictable contractual revenue, a sustainable dividend, continued mobile-data growth and rapidly expanding data-center demand.
Wall Street’s
$212 average price target implies approximately 21% upside for
$AMT
before including the dividend.
