We recently compiled a list of the 15 Best Stocks For Dividends. In this article, we are going to take a look at where American Tower Corporation (NYSE:AMT) stands against the other dividend stocks.
In 2023, dividend stocks underperformed compared to the overall market, which was driven largely by tech stocks. As we move into the latter half of 2024, dividend stocks have shown a similar performance trend in the first half of the year. The Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, is down by 0.17% year-to-date, compared with a nearly 18% gain in the broader market. Dividend stocks are declining for two main reasons. First, high interest rates are drawing investors towards bonds instead. Second, the current surge in AI technology is capturing investors’ focus on tech stocks. The tech-heavy NASDAQ has achieved its all-time high this year, surging by over 25% so far in 2024. That said, investors haven’t completely lost faith in dividend stocks. When all is said and done, successful investing is about playing the long game. Dividend stocks have consistently delivered, accounting for 36% of the market’s total return since 1927. Bank of America has also declared 2024 as ‘the year of dividends’.
In dividend investing, dividend growth stocks often take a lead over high-yield dividend stocks. Recent research indicates that companies providing consistent and sustainable dividends, without excessive payouts, have delivered the best long-term returns. Wellington Management conducted a study that categorized dividend-paying companies into five groups based on their payout levels. Since 1930, the research found that stocks with the highest dividend payouts generally performed similarly to those with high, but not the very highest, payouts, although they frequently traded places as the top performers over the decades.
Also read: 10 Very High Yield Dividend Stocks With Upside Potential
The dividend growth strategy has become so prominent over the years that many companies in the US are steadily increasing their payouts. In 2023, dividend payments reached an all-time high and have consistently increased over the years. Analysts are very optimistic about dividend payments for 2024, and recent projections indicate that the companies are on course to meet this new target record. One of the key reasons for this growth is that many companies, especially large technology firms, have abundant cash reserves and are rapidly increasing their free cash flows. This strong financial position enables them to continue rewarding their investors with higher dividend payments. According to the latest report by S&P Dow Jones Indices, companies in the index paid $153.4 billion in dividends in the second quarter of 2024, up from $151.6 billion from the previous quarter and up from $143.2 billion in the same period last year. The report also mentioned that there were 539 reported dividend increases, compared to 460 in the prior-year period, marking a 17.2% year-over-year rise. The total amount of these dividend increases reached $20.4 billion for the quarter, up from $9.8 billion in Q2 2023.
Dividend growth stocks are a hit with investors because they have rock-solid businesses, a steady cash flow, and strong balance sheets. These companies are top-notch for generating passive income. In this article, we will take a look at some of the best dividend stocks to buy.
Our Methodology:
To compile this list, we thoroughly reviewed reputable sources such as Forbes, Morningstar, Barron’s, and Business Insider. From their latest articles, we gathered the stocks they collectively favored. Additionally, we assessed the sentiment of hedge funds for each stock using Insider Monkey’s Q1 2024 database. The stocks are arranged in ascending order based on the number of hedge funds that hold stakes in these companies. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A wide angled view of a high-rise office building, the windows reflecting a nearby cityscape.
American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 56
American Tower Corporation (NYSE:AMT) is an American real estate investment trust company that deals in wireless and broadcast communications infrastructure in several countries. Earlier this year, the company announced a collaboration with IBM to speed up the implementation of a hybrid, multi-cloud computing platform at the edge. With growing interest in distributed edge computing, IBM and American Tower recognized an opportunity to combine their respective strengths and provide significant customer value on a large scale.
As a real estate investment trust (REIT) company, American Tower Corporation (NYSE:AMT) is facing challenges due to high interest rates, which have contributed to a decline of over 31% from its peak in 2021. In addition, its significant investments in data centers have not yielded the expected results. In the first quarter of 2024, the company reported $450 million in development spending in its Data Centers segment. The stock is down by over 5% year-to-date. However, its recent quarterly earnings are pretty encouraging. The company reported a total revenue of $2.8 billion, with the international market contributing $1.22 billion of that amount. Its FFO of $2.79 per share beat analysts’ estimates by $0.22.
Baron Funds also highlighted reasons to invest in American Tower Corporation (NYSE:AMT) in its Q1 2024 investor letter. Here is what the firm has to say:
“Following a more than 30% rebound in the fourth quarter of 2023, shares of American Tower Corporation (NYSE:AMT) lagged in the first quarter of 2024. The uncertainty around the timing and ultimate financial impact of American Tower’s India business sale, ongoing lower overall spending by wireless carriers, and higher interest rates weighed on the company’s shares. Please refer to our “Top Net Purchases” section for our rationale for acquiring additional shares.
In the first quarter, we continued to acquire additional shares of American Tower Corporation, a global operator of over 200,000 wireless towers. We believe that 2023 marked a trough in earnings growth, financing/interest rate headwinds, and valuation bottoming. Looking ahead, we are more optimistic about the company’s prospects due to its: i) accelerating growth expectations; ii) cash flow stability underpinned by core developed markets; iii) secular demand drivers such as growing mobile data usage, 5G spectrum deployment and network investment, edge computing, and connected homes and cars, which will require increased wireless bandwidth and increased spending by the mobile carriers; and iv) strong growth within CoreSite, its network-dense data center company, and optionality with that business segment as future network needs and architecture evolve.”
Though American Tower Corporation (NYSE:AMT) is in a distinctive position to consistently drive growth across the entire 5G technology lifecycle, its dividend history remains a key attraction for investors. In the most recent quarter, the company’s cash flow remained stable. It generated $1.3 billion in operating cash flow, up 20% from the same period last year. Its free cash flow also showed a whopping 48% YoY growth at $882 million. In the past five years, the company has raised its payouts at an annual average rate of 14%. Overall, it has been growing its dividends for 13 consecutive years, which makes AMT one of the best stocks for dividends. Currently, it offers a quarterly dividend of $1.62 per share for a dividend yield of 3.13%, as reported on July 15.
At the end of March 2024, 56 hedge funds in Insider Monkey’s database owned stakes in American Tower Corporation (NYSE:AMT), the same as in the previous quarter. These stakes are valued at nearly $3 billion in total.
Overall AMT ranks 11th on our list of the best dividend stocks to buy. You can visit 15 Best Stocks For Dividends to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of AMT as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than AMT but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.