Last update on 2024-06-27

American Tower (AMT) - Dividend Analysis (Final Score: 3/8)

Evaluate American Tower's (AMT) dividend yield, growth rate, payout ratio, and stability for insightful investment decisions. Comprehensive analysis scored 3/8.

Short Analysis - Dividend Score: 3

We're running American Tower (AMT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis of American Tower (AMT) against an 8-criteria system reveals mixed results. Although AMT's dividend yield is below the industry average, it has shown consistent growth over two decades. However, its dividend growth rate isn't consistently above 5%, and its payout ratio occasionally spikes over 100%, indicating risk. While dividends are well-covered by earnings and cash flow, and there is general stability in payouts, its 13-year dividend payment history doesn't meet the 25-year consistency criterion, suggesting limited long-term dependability. Furthermore, AMT’s stock repurchasing activities have been irregular and mainly directed towards capital raising rather than buybacks.

Insights for Value Investors Seeking Stable Income

Investors looking for consistent income might find American Tower (AMT) somewhat reliable, given its stable dividend growth and good dividend coverage by cash flow. However, the dividend growth rate and payout ratio fluctuations are concerning. Additionally, the limited historical dividend payment duration and irregular stock repurchases make it less appealing for long-term income-oriented investing. It might be worth exploring but with cautious expectations for stability and consistency.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of annual dividend payments to the stock price. It is a key indicator of the return on investment from dividends.

The dividend yield for American Tower (AMT) stands at 2.9878%, compared to the industry average of 3.83%. While AMT's yield may appear lower, it's essential to consider broader trends. Over the past two decades, AMT's dividend yield has shown consistent growth, starting from 0% in the early 2000s and rising steadily to its current level. The gradual increase reflects AMT's commitment to returning capital to shareholders, even as its stock price has appreciated significantly—from $10.82 in 2003 to $215.88 in 2023. Simultaneously, the industry average yield has experienced significant fluctuations, spiking to as high as 8.48% in 2014 but stabilizing around 3-4% range in recent years. Hence, while AMT's current yield is below the industry norm, its progressive growth trajectory and the stability of its payouts suggest a robust and shareholder-friendly policy, good for long-term investment.

Average annual Growth Rate higher than 5% in the last 20 years?

Criterion 1.1: The Dividend Growth Rate is higher than 5% in the last 20 years.

Based on the given data, American Tower (AMT) shows an inconsistent dividend growth ratio over the past 20 years. Observably, from 2012 to 2013, there was a remarkable increase at a dividend per share ratio of 157.1429%, while the average of these ratios over 20 years is approximately 17.82%. This suggests some significant hikes but also sharp declines in certain years. The rates fluctuate drastically, with high peaks and low valleys, often diverging around the critical 5% mark. This denotes volatility and could suggest the company's dividend growth is not steadily above 5%, making it potentially less reliable for income-focused investors despite some periods of exponential growth. This intermittent trend might be unfavorable if seeking consistency in dividend growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures the proportion of earnings paid out as dividends to shareholders. It is important for an average payout ratio to be lower than 65%, as high ratios may indicate that the company is returning too much to shareholders and not reinvesting enough for growth.

From 2011 onwards, American Tower (AMT) started paying dividends, evidenced by a payout ratio (%) of 35.3286. While in compelling years 2011 and 2012, the payout ratio was 35.3286% and 56.3874%, it started fluctuating sharply with instances such as 111.7629% in 2015 and peaking at 202.6645% in 2023. Low payout years complemented with stretches over the 100% mark raise serious concerns. Hence, AMT scarcely maintains an average payout ratio under 65%. While a lower average (62.258%) is momentarily congruent, the unsustainable spikes in recent years pose risks fraught with investor apprehensions indicative of a high channeling of revenue to dividends without healthy retention needed for sustaining imperative growth.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

For a secure dividend policy, it's critical that a company's earnings can comfortably cover its dividend payouts. When earnings per share (EPS) adequately cover dividends per share (DPS), it mitigates the risk of dividend cuts and signals financially healthy operations, potentially leading to capital appreciation alongside dividend income.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Analyzing the free cash flow (FCF) and dividend payout amounts from 2003 to 2023, we focus on the trend in the dividend coverage ratio. From zero coverage prior to 2011, the ratio began to improve markedly, hitting 0.214 in 2011 and progressing to a peak of 1.443 in 2022 before slightly declining to 1.008 in 2023. The general upward trend suggests increasingly robust cash flow relative to dividends, making American Tower's dividend payments more sustainable and secure. However, the spike to 1.443 in 2022 may raise questions about the sustainability of such high coverage due to potential fluctuations in cash flow. Overall, the trend is positive as the current ratio remains above 1, indicating dividends are well-covered by cash flow—a reassuring sign for investors.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades.

The dividend per share over the past 20 years has shown a consistent increase from 0 in 2003-2010 to 6.45 in 2023. This upward trend is highly favorable for income-seeking investors, indicating strong financial health and consistent cash flow generation. However, there is a notable exception as the return year saw a drop of 20%, which raises some concerns about periodic volatility but overall reflects positive stability.

Dividends Paid for Over 25 Years?

Explain the criterion for American Tower (AMT) and why it is important to consider

Dividends Paid for Over 25 Years is a crucial criterion as it displays the company's reliability in providing shareholders with consistent returns over a long period. This spans through various economic cycles, indicating stability. A consistent dividend for 25 years can be a positive mark of trust and dependability for investors.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluating stock repurchases is crucial because it shows how well the company is using its earnings to benefit shareholders. Consistent repurchase activity might indicate financial stability and strong cash flow.

Over the past 20 years, American Tower (AMT) has shown intermittent stock repurchase activities chiefly concentrated in the years 2007-2013 and a singular instance in 2019. The company has increased shares from 208 million in 2003 to 466 million in 2023. Average repurchase activity is indicated at approximately 4.7% annually. Though intermittent, the repurchases suggest the company's focus on capital returns. However, the majority of these years have seen an increase in share count, reflecting more on capital raising than buybacks. This fluctuating approach could hint at financial adjustments or evolving corporate strategies. Still, a somewhat reliable but not incredibly strong trend in benefiting shareholders through repurchases can be discerned overall, which can be interpreted as moderately good for shareholder value enhancement.