Telefonica is the incumbent telephone operator in Spain, which accounts for about 29% of the group's sales as of 2020. Besides Spain; Brazil, Germany and U.K. are key markets. Management intends to spin off its Latin American operations, except Brazil. The firm has launched two new business units: Telefonica Tech and Telefonica Infrastructure. Telefonica Tech, a B2B segment offers cybersecurity, the Internet of Things, big data, and cloud services. Telefonica Infrastructure manages the firm's infrastructure assets (towers, antenna systems, data centers, and greenfield fiber projects).

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<p><a href="https://investorplace.com">InvestorPlace - Stock Market News, Stock Advice &amp; Trading Tips</a></p>

<p>While big telecommunications stocks like <strong>AT&amp;T</strong> (NYSE:<span><a href="https://investorplace.com/stock-quotes/t-stock-quote/"><strong>T</strong></a></span>), <strong>Verizon Communications</strong> (NYSE:<span><a href="https://investorplace.com/stock-quotes/vz-stock-quote/"><strong>VZ</strong></a></span>) and <strong>T-Mobile US</strong> (NASDAQ:<span><a href="https://investorplace.com/stock-quotes/tmus-stock-quote/"><strong>TMUS</strong></a></span>) remain bargains because of their debt levels their landlord, <strong>American Tower</strong> (NYSE:<span><a href="https://investorplace.com/stock-quotes/amt-stock-quote/"><strong>AMT</strong></a></span>) stock is trading like an internet stock.</p>
	<div><img src="https://investorplace.com/wp-content/uploads/2019/08/amt-stock-1-300x169.jpg" alt="A magnifying glass zooms in on the American Tower (AMT) website." width="300" height="169" /><div>Source: Pavel Kapysh / Shutterstock.com</div></div>
	
<p>Shares were due to open Jan. 25 at about $224 each. That&rsquo;s a market cap of $99 billion on estimated 2020 revenue of $7.8 billion. Great googly-moogly!</p>
<p>The reason for this valuation is clear. AMT has been taking over 20% of its revenue to the net income line and handing it back to shareholders. Over the last five years its dividend has more than doubled, and so has the stock price.</p>
<h3>The Secret</h3>
<p>The secret is that AMT is organized as a real estate investment trust (REIT). Those are the rules of a REIT. You build with debt and hand out profits in cash.</p>
<ul><li><a href="https://investorplace.com/2021/01/some-stocks-under-20-merit-consideration-after-biden-is-sworn-in/">7 Great Sub-$20 Stocks to Buy After Inauguration Day</a></li>
</ul><p>At the end of September, the last time it reported, AMT carried debt of nearly $31.7 billion, on assets of under $41.5 billion. For an operating company this might be a worry. For a REIT, especially at a time of super-low interest rates, it&rsquo;s just business.</p>
<p>Over the last six months, for instance, American Tower has priced two debt issues, one for $2 billion, one for $1.75 billion. The <a href="https://seekingalpha.com/news/3579544-american-tower-prices-2b-debt-offering" target="_blank">$2 billion issue</a> went off at prices from 1.3% to 3.1% &ndash; the latter is a 30-year note. The <a href="https://seekingalpha.com/news/3637335-american-tower-prices-1_75b-in-senior-debt" target="_blank">$1.75 billion</a> came even cheaper, with $500 million of it, due in 2024, carrying a coupon of just 0.6%.</p>
<h3>The Risks</h3>
<p>That means when interest rates are low, American Tower needs to grow. That&rsquo;s precisely what management has been doing.</p>
<p>In November it signed a deal to buy InSite Management Group, which manages about 3,000 sites, <a href="https://finance.yahoo.com/news/american-tower-amt-stock-insite-144502690.html" target="_blank">for $3.5 billion.&nbsp;</a></p>
<p>Then on Jan. 14 it announced <a href="https://www.nasdaq.com/articles/american-tower-amt-announces-%249.4b-deal-to-buy-telxius-towers-2021-01-14" target="_blank">a $9.4 billion deal to buy Telxius Towers</a>, which has 31,000 towers, from Spain&rsquo;s <strong>Telefonica S.A.</strong> (OTCMKTS:<span><a href="https://investorplace.com/stock-quotes/tefof-stock-quote/"><strong>TEFOF</strong></a></span>). The latter deal came with a $500 million commitment to build out 3,300 more sites in Germany and Brazil.</p>
<p>The deals highlighted the risks of owning American Tower. If the lending window shuts, they have trouble. Over the last six months, as the interest cost of <a href="https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx" target="_blank">the U.S. 10-year note has nearly doubled from 0.59% to 1.09%</a>, American Tower stock has sunk.</p>
<h3>The Opportunity</h3>
<p>For now, AMT&rsquo;s growth makes the stock a better bargain. You would have paid $272 per share for it on July 29, its all-time high. Today you can get it for about $224.</p>
<p>You&rsquo;re betting that AMT can manage its towers and continue to draw premium rent for them, thus growing the dividend. The most recent dividend, announced in December, was $1.21 per share. The previous dividend, announced in September, was $1.14 per share.</p>
<p>That puts the current yield on AMT at 2.18%, which doesn&rsquo;t sound like much. But buying a dividend stock means putting it away and letting time work for you. Five years ago, shares were trading at $105, and the dividend was 51 cents. If you had bought some shares then and just held on, next year&rsquo;s expected dividends of $4.84 represent a yield of nearly 9.4%.</p>
<p></p>
<h3>The Bottom Line</h3>
<p>Owning AMT stock is like owning a bond. When interest rates rise, your equity value drops.</p>
<p>But so long as AMT can keep drawing income from its assets, it&rsquo;s money in the bank. That&rsquo;s what income investors are looking for.</p>
<p>It&rsquo;s also important to note that cellular traffic continues to grow, and so does the need for towers to host the equipment. AMT is a lot more like <strong>Equinix</strong> (NASDAQ:<span><a href="https://investorplace.com/stock-quotes/eqix-stock-quote/"><strong>EQIX</strong></a></span>), which leases cloud data centers, than it is like <strong>Simon Property Group</strong> (NYSE:<span><a href="https://investorplace.com/stock-quotes/spg-stock-quote/"><strong>SPG</strong></a></span>), which leases shopping centers.</p>
<p><em>At the time of publication, Dana Blankenhorn owned shares in T. He did not have </em><em>(either directly or indirectly) any positions in any of the other securities mentioned in this article.</em></p>
<p><a href="http://www.danablankenhorn.com/"><em>Dana Blankenhorn</em></a><em> has been a financial and technology journalist since 1978. He is the author of </em><a href="https://www.amazon.com/Technologys-Big-Bang-Yesterday-Tomorrow-ebook/dp/B0829C7XSF"><em>Technology&rsquo;s Big Bang: Yesterday, Today and Tomorrow with Moore&rsquo;s Law</em></a><em>, available at the Amazon Kindle store. Write him at </em><a href="https://d.docs.live.net/3ee366d2beb18dea/Documents/InvestorPlace/danablankenhorn@gmail.com"><em>danablankenhorn@gmail.com</em></a><em>, tweet him at </em><a href="http://www.twitter.com/danablankenhorn"><em>@danablankenhorn</em></a><em>, or subscribe to his Substack </em><a href="https://danafblankenhorn.substack.com/"><em>https://danafblankenhorn.substack.com/</em></a><em>.</em></p>
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<p>The post <a href="https://investorplace.com/2021/01/american-tower-amt-stock-carries-value/">American Tower: The Telecom Landlord Carries Value</a> appeared first on <a href="https://investorplace.com">InvestorPlace</a>.</p>

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