AMERICAN TOWER STOCK ANALYSIS: 5G REIT
There are multiple ways you can win from 5G. You can invest in companies that produce end products, for example, $AAPL . You can also invest in companies making 5G semiconductors, for example, $SWKS and $QCOM . You can invest in carriers such as $VZ or $T . But what about investing in the network infrastructure itself? Well, there are companies such as $CSCO and $NOK which are going to build the necessary routers. Where do we put those 5G routers? On cell towers. Today, we'll look at the largest of these tower companies: $AMT .
$AMT is classified as a REIT(Real Estate Investment Trust) and their business is simple, they build towers and lease the space to carriers such as $S $T $VZ or $TMUS . The carriers, then, install their antennas on these towers. Usually, one tower can support 3 different antennas and American Tower can make money from each one of them independently.
Most of the operations of the company are overseas, they have big operations in India, Nigeria, Brazil and other developing countries. In India and Nigeria, most people are still using a 2G network, and American Tower is leading the way to building 3G and 4G. There is still a lot of money to be made in these markets. As for Europe and North America, they are going to make money from 5G.
Since $AMT is a REIT, they are required to pay 90% of their profits as dividends. I believe that the best metric to use when analyzing any REIT is to subtract the total dividends paid from the free cash flow. The amount of money left, is the amount of money the company can use to grow organically without any additional issuance of debts or stocks. I've seen these numbers for $AMT and they have been growing for years even during the 2008-2009 recession(people always use their phones). Now, if we look at the dividend yield, it is 1.5. Why is it so low if the company has a dividend payout of 90%? It is because the stock is really expensive. It has a P/E of 70. As a long-term investment, it is too expensive for me. But because of the opportunity with 5G, I believe that for the short term(next 5 years), this company is going to do great.
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