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Why American Tower Stock Jumped 8.6% Today

The Motley Fool · 1d ago

Key Points

  • SpaceX agreed to buy an $8 billion portfolio of 800 MHz spectrum licenses from Grain Management.

  • The deal could pave the way for a SpaceX cell network, which would need tower space to work.

  • Tower operators rallied on the news while traditional wireless carriers slipped.

Shares of American Tower (NYSE:AMT) are standing tall today. As of 11:35 a.m. ET, the wireless infrastructure giant was up 8.6% on another company's news.

Two workers in hard hats and safety vests look up at a tall red-and-white cell tower.

Image source: Getty Images.

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Why a spectrum deal lifts tower stocks

The catalyst here is Space Exploration Technologies (NASDAQ:SPCX) agreeing to spend $8 billion on a high-quality radio spectrum portfolio.

Private equity firm Grain Management's nationwide patchwork of spectrum licenses in the 800-MHz range sets SpaceX up to create a terrestrial cellphone network. Wireless infrastructure players like American Tower surged on the news, while U.S. and European cell network leaders fell.

The ink is still drying on the Grain portfolio deal, so it's a bit early to speculate how SpaceX plans to implement the phone network. However, it's almost impossible to start a nationwide network in America without American Tower's services.

Furthermore, 800-MHz signals are top-notch communications network material, with long range and good building penetration. American Tower has a ton of existing infrastructure in this category, making it easy to add another tenant.

Towers win no matter who builds the network

After a weak summer, American Tower's shares are now back to prices last seen in early June.

At the same time, the trailing dividend yield is up to 3.9%, recently reaching an all-time high of 4.4%. Today's price jump pushed the yield down, but American Tower keeps funneling cash flows into its payouts. With or without significant SpaceX lease contracts, American Tower remains an effective income stock for long-term investors.

And the rumor mill is probably on the right track today, so the company should benefit from increased competition and another deep-pocketed customer in the domestic cell service market.

Anders Bylund has positions in American Tower. The Motley Fool has positions in and recommends American Tower. The Motley Fool has a disclosure policy.