As 5G technology reshapes industries, Real Estate Investment Trusts (REITs) with stakes in communication infrastructure are positioned to benefit from this high-tech wave. Below, I have highlighted three fundamentally strong REITs: American Tower Corporation (AMT), Crown Castle Inc. (CCI), and SBA Communications Corporation (SBAC), which are poised for growth as the 5G rollout gains momentum.
You’ve probably heard of 5G by now. It’s the latest or, let’s say, ‘fifth’ generation of cellular wireless technology that promises speeds up to 100 times faster than 4G, enabling nearly instant internet connections. Beyond our smartphones, 5G unlocks the potential for innovations like self-driving cars, advanced robotics, AI-driven applications, and even entire smart cities.
However, to support this next-generation technology, an extensive infrastructure overhaul is necessary, meaning new and upgraded cell towers and support structures are in high demand. According to Fortune Business Insights, the global 5G infrastructure market is projected to reach $590.18 billion by 2032, exhibiting a CAGR of 42.7% from 2024 to 2032.
This increased need for towers translates to growing opportunities for REITs specializing in communication infrastructure. Moreover, REITs offer a unique advantage for investors, as they’re required to distribute at least 90% of their income as dividends, making them a reliable source of returns even in uncertain economic times.
Furthermore, Technavio projects that the global REIT market will increase by $350.20 billion between 2023 and 2028. The market’s growth momentum is estimated to accelerate at a CAGR of 2.9% in the same period.
With these factors in mind, let’s examine the fundamentals of REITs - Diversified stocks, starting with the #3 on our list.
Stock #3: Crown Castle Inc. (CCI)
CCI is a REIT that owns, operates, and leases more than 40,000 cell towers and approximately 90,000 route miles of fiber supporting small cells and fiber solutions across the U.S. market. Its business provides access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease, and service agreements.
On September 30, the company paid its shareholders a quarterly dividend of $1.57 per common share. With nine years of consecutive dividend growth, CCI pays an annual dividend of $6.26, which translates to a yield of 5.62% at the current price level. Moreover, its dividend payouts have grown at CAGRs of 5.6% and 6.8% over the past three and five years, respectively.
CCI’s site rental revenues increased marginally year-over-year for the third quarter that ended September 30, 2024, to $1.59 billion. Its operating income grew 11.9% from the year-ago value to $544 million, while its net income stood at $303 million, up 14.3% year-over-year. The company’s adjusted EBITDA grew 2.7% from the prior year period to $1.08 billion. Also, its adjusted FFO and AFFO per share came in at $801 million and 1.84, representing an increase of 4.4% and 3.9% year-over-year.
Analysts expect CCI’s FFO and revenue for the current year ending December 31, 2024, to reach $6.61 and $6.56 billion, respectively. For the fiscal year 2025, its EPS is forecasted to increase by 1.8% year-over-year to $6.73, while its revenue is estimated to be $6.46 billion.
Over the past year, the REIT has gained 23.6%, closing the last trading session at $108.91.
CCI’s stance is reflected in its POWR Ratings. It has a B grade for Momentum and Quality. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #16 out of 44 stocks in the REITs - Diversified industry. Click here to see the other CCI ratings for Growth, Value, Stability, and Sentiment.
Stock #2: SBA Communications Corporation (SBAC)
SBAC is a leading independent owner and operator of wireless communications infrastructure, including towers, buildings, rooftops, distributed antenna systems (DAS), and small cells. It has a portfolio of more than 39,000 communications sites in 15 markets throughout the Americas, Africa, and the Philippines.
On September 18, buoyed by its strong financial performance, SBAC paid its shareholders a quarterly dividend of $0.98 per share on its Class A Common Stock. The company has raised its dividends for four consecutive years. It pays an annual dividend of $3.92, which translates to a yield of 1.59% at the current price level. Moreover, SBAC’s dividend payouts have grown at a CAGR of 19.8% over the past three years, while its four-year average dividend yield is 1.08%.
SBAC’s total revenues for the fiscal second quarter that ended June 30, 2024, amounted to $660.48 million, with a 1.2% year-over-year increase in its site leasing revenue. Its operating income stood at $354.47 million, up 46.9% year-over-year, while its net income grew 30.4% from the year-ago value to $159.45 million. Moreover, the company’s AFFO and AFFO per share amounted to $354.33 million and $3.29, respectively, increasing 1.5% and 2.8% from the prior year’s period.
For the third quarter of fiscal 2024 (ended September 2024), SBAC’s FFO is expected to grow by 17.7% year-over-year to $3.20, while its revenue for the same period is estimated to be $670.22 million. Moreover, the consensus revenue and FFO estimates of $2.71 billion and $12.70 for the next fiscal year ending December 2025 reflect a 2% and 2.8% year-over-year growth, respectively.
The stock has gained 22.7% over the past year to close the last trading session at $241.79.
SBAC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It also has a B grade for Growth, Momentum, and Quality. Within the same industry, it is ranked #7 out of 44 stocks. Click here to see the additional ratings for SBAC (Value, Stability, and Sentiment).
Stock #1: American Tower Corporation (AMT)
AMT owns, operates, and develops real estate for multitenant communications. It works primarily on leasing space on multitenant communications to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies, municipalities, and tenants in various industries.
On September 12, AMT declared a quarterly cash distribution of $1.62 per share on its common stock. The distribution is payable on October 25, 2024, to stockholders of record at the close of business on October 9, 2024. This reflects AMT’s ongoing commitment to shareholder returns.
AMT has raised its dividends for 11 consecutive years. It pays an annual dividend of $6.48, which translates to a yield of 2.87% at the current share price level. Moreover, the company’s dividend payments have grown at CAGRs of 9.3% and 12.7% over the past three and five years, respectively.
AMT’s total operating revenues for the fiscal second quarter that ended June 30, 2024, increased 4.6% year-over-year to $2.90 billion. The company’s operating income grew 47% from the year-ago quarter to $1.28 billion, while its attributable net income came in at $900.30 million, representing an increase of 89.3% from last year.
In addition, AFFO and AFFO per share attributable to AMT common stockholders stood at $1.31 billion and $2.79, up 13.5% and 13.4% year-over-year, respectively. Furthermore, its adjusted EBITDA rose 8.1% from the prior year’s period to $1.89 billion.
Street expects AMT’s FFO for the current year (ending December 2024) to increase 7% year-over-year to $10.56, while its revenue is estimated to reach $10.94 billion. Furthermore, AMT topped the consensus FFO estimates in three of the trailing four quarters, which is promising.
Shares of AMT have surged 28.5% over the past six months and 36.5% over the past year to close the last trading session at $222.80.
AMT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, Stability, Sentiment, and Quality. AMT is ranked #5 out of 44 stocks in the REITs – Diversified industry. Click here to see AMT’s rating for Value.
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AMT shares . Year-to-date, AMT has gained 5.76%, versus a 22.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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