Unabated Demand Could Drive Towering Growth for This Top Dividend Stock in 2025 and Beyond

American Tower (NYSE: AMT) has encountered a few speedbumps over the past year, which has slowed its growth. As a result, the infrastructure-focused real estate investment trust (REIT) hasn't been able to increase its dividend. That's a notable departure for a company that had delivered more than 20% annual dividend growth since 2013.

The infrastructure REIT's headwinds are masking the unabated demand it's seeing for communications and data infrastructure. With its headwinds expected to fade, the REIT could deliver towering growth in 2025 and beyond. That could enable it to get back on track with increasing its 3%-yielding dividend.

A temporary setback

American Tower barely grew during the third quarter. Its total revenue rose less than 0.1%, while its adjusted funds from operations (FFO) was up only about 3%.

A major factor impacting the REIT during the third quarter was the sale of its troubled Indian tower operations to Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP). The deal enabled Brookfield Infrastructure to expand its tower operations in the country, growing its platform from 175,000 towers to 253,000 while diversifying its customer base. Brookfield acquired the business at an attractive value because American Tower had struggled to make money on its portfolio because of tenant issues. With a much larger scale in the country, Brookfield is in a better position to maximize the value and earnings capacity of those towers.

Given the issues with its India tower business, American Tower has hit the brakes on increasing its dividend this year. Its current dividend level of $1.62 per share is flat with the year-ago period and down from the $1.70 per share it paid in the fourth quarter of last year. That enabled the company to retain more cash to invest in expanding its data and communications infrastructure so that it could maintain a strong balance sheet.

Robust underlying growth

The issues facing American Tower's Indian tower platform overshadowed the strong underlying demand experienced across the rest of its global tower and data center portfolio. CEO Steven Vondran stated in the third-quarter earnings release: "Our third quarter results continue to reflect the unabating demand for our global portfolio of communications infrastructure assets, underpinning the expectations we laid out at the start of the year. Carrier rollouts of 5G coverage are supporting robust activity levels in the U.S. and Europe, while emerging markets, particularly in Africa, are also seeing healthy pipelines of new business driven by network upgrades and coverage expansion."

Organic tenant billings growth was a healthy 5% across the U.S. and Canada and 6.3% in Europe during the third quarter. Meanwhile, Africa delivered 11.5% organic tenant billings growth in the period. The company benefited from adding tenants to its existing towers to support their expanding networks. American Tower is also investing capital to build additional tower sites across several markets to support its tenants' needs.

Meanwhile, demand for capacity in the company's data centers was strong. The CEO noted, "CoreSite delivered another fantastic quarter of new leasing, and is on pace for its third consecutive year of record sales, as accelerating hybrid-IT deployments and early signs of AI-related workloads fuel demand." Revenue for the company's data center segment grew by 10% to $233 million, driven by rising rates and occupancy. Meanwhile, the company had 45 megawatts of new data center capacity under construction, 58% of which it has already leased.

The company's investments to expand its tower portfolios in stronger markets and its U.S. data center capacity will help it deliver higher-quality earnings in the future. Those investments, along with the company's other initiatives to drive cost efficiencies and manage its capital structure by reducing debt, put it in the position to end the year strong. Furthermore, Vondran stated American Tower is "well positioned to deliver high-quality, attractive earnings growth and shareholder returns into 2025 and beyond."

Getting back on a growth track

American Tower had grown briskly over the years by expanding its data infrastructure portfolio to capitalize on the growth in data demand. While the REIT hit a speed bump in 2024, it expects to reaccelerate in 2025 and beyond, so it should be able to resume dividend growth. That makes it an attractive investment for those seeking income and strong upside potential.

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Matt DiLallo has positions in American Tower, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners and has the following options: long January 2026 $170 calls on American Tower and short January 2026 $175 calls on American Tower. The Motley Fool has positions in and recommends American Tower. The Motley Fool recommends Brookfield Infrastructure Partners and recommends the following options: long January 2026 $180 calls on American Tower and short January 2026 $185 calls on American Tower. The Motley Fool has a disclosure policy.