Communications Sector

[gfp927z]

>>> American Tower (NYSE:AMT)


Motley Fool

https://www.fool.com/investing/2021/09/04/3-recession-ready-stocks-to-buy-in-month-due-830/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


American Tower is a cellphone tower REIT that's benefiting from increasing demand for mobile data. The company's biggest customers are AT&T, T-Mobile, and Verizon, which account for 89% of its revenue combined. These companies lease space on American Tower's transmission towers. Like Realty Income, American Tower benefits from highly stable customers.

American Tower is insulated from the ebbs and flows of the economy because of consumers' voracious appetite for mobile data. On the company's first-quarter earnings conference call, it said that the average smartphone user consumes 15 gigabits per month, and it expects that number to grow to 50 gigabits per month by 2026, which works out to a 27% cumulative average growth rate.

While most investors consider American Tower a growth stock (which makes sense), it also rewards its shareholders with income. The company has hiked its dividend every quarter since April 2012. The company is guiding for 2021 AFFO per share to rise to $9.50 per share, which gives the stock a multiple of 31 times AFFO per share. Again, this is toward the high end of its historical range. The dividend yield is 1.8%, which is small for a REIT, but you are getting 12% annual AFFO per share growth, and a longer-term growth story. Historically, American Tower has traded with a dividend yield between 1.4% and 2.25%, so the stock is in the middle of its range.

American Tower and Realty Income are both trading on the high side of their historical valuation range. That's typical when the stock market's trading at record highs; every potential stock investment will seem expensive compared to historical multiples.

Keep in mind that these stocks have resilient business models that will perform well even in a recession. If the economy goes into a recession, expect their price-to-earnings ratios to fall, but the businesses themselves should hold up despite the economy. Investors can't really escape overall multiple compression without trying to time the market, which is generally a losing proposition..

Duke Energy and Realty Income are good income stocks that will hold up reasonably well if we get another outbreak of COVID or the economy weakens materially. Think of them as income stocks that double as defensives. American Tower is a growth stock, and revenues should continue to grow as the market for mobile data increases.

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