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Investing in cell tower real estate investment trusts (REITs) can be a lucrative opportunity for investors looking to gain exposure to the telecom industry. The increasing demand for wireless connectivity and the rollout of 5G technology are expected to drive the growth of cell tower REITs in the coming years.
Investors interested in cell tower REITs should conduct thorough research on the companies’ financial health, portfolio of assets, and the overall outlook for the telecom industry. This article will discuss the top five cell tower REITs worth investing in.
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What is a Cell Tower REIT?
REITs are investment vehicles that allow individuals to invest in real estate properties and earn income from them. Cell tower REITs, also known as cell tower infrastructure REITs or cell tower companies, specialize in owning and leasing cell towers and other wireless communication infrastructure.
While many cell tower REITs primarily own large communications towers hosting cellular network broadcast equipment, some invest in fiber and small-cell networks. Cell towers and other infrastructure facilitate wireless communication and data transmission, enabling mobile phone networks to function effectively.
Many cell phone tower REITs choose to own and lease out cell towers to wireless service providers. In this case, cell tower REITs earn from long-term lease agreements with wireless carriers that could have a duration of 10 to 20 years and include provisions for regular rent increases.
Like all REITs, cell tower REITs must pay 90% of taxable income each year in dividends, offering investors stable income and the possibility of long-term appreciation.
Top 5 Cell Tower REITs to Invest in
The following cell tower REITs offer a balance of dividends, strong balance sheets and long-term growth potential as cell tower investments.
1. American Tower Corp. (NYSE: AMT)
American Tower is currently rated as one of the largest U.S. REITs by market cap, with a current market cap (October 2024) of $105.7 billion. Acquisitions include the data center REIT CoreSite Realty. American Tower also owns properties leased by the four U.S. nationwide cellular network operators. With over a 4.4% increase in stock value over the past five years and 2.86% annual dividend yields, American Tower remains a reasonable bet for stable dividends and long-term growth opportunities.
2. SBA Communications Corp. (NASDAQ: SBAC)
Florida-based SBA Communications was founded in 1989 and owns and operates wireless communications infrastructure. With buildings, rooftops, towers, distributed antenna systems and small cells in 14 markets across the Americas and South Africa, SBA Communications operates primarily through site leasing and site development services.
Although it pays one of the lowest dividends on the list — just 1.61% — it has a current market cap of over $26.2 billion. The stock witnessed a 22.5% rise in the past six months and 23.7% in the last year, even though the value dipped slightly in the five-year period. The strong history and diversified market holdings could make it a reliable long-term option.
3. Crown Castle Inc. (NYSE: CCI)
Crown Castle, a Houson-based company, has a portfolio that includes about 80,000 small cell nodes and 80,000 route miles of fiber. It has a presence in every major U.S. market. With a market cap of over $48.2 billion, it’s smaller than competitors, but with a 5.66% annual dividend yield, it also offers higher dividends. While it has experienced a loss in stock valuation over the past five years, the stock’s one-year and six-month reporting periods have shown a gain of over 25.6% and 16% respectively.
4. Uniti Group Inc. (NASDAQ: UNIT)
Uniti Group is a REIT focused on acquiring and constructing communications industry mission infrastructure. Market areas include leasing, fiber infrastructure, towers, consumer CLEC and corporate. With a market cap of $1.4 billion, losses in stock value over the last six months and five years (from over $20 in 2018 to over $5 now) are at least somewhat balanced by an almost 30% jump in the past year and a 10.64% annual dividend yield. A recent increase in value may present investors willing to buy and hold long-term with a market opportunity.
5. DigitalBridge Group Inc. (NYSE: DBRG)
DigitalBridge invests in digital infrastructure across five verticals: macro cell towers, fiber networks, small cells, data centers and edge infrastructure. DigitalBridge’s market cap of $2.75 billion seems modest compared to industry leaders on this list but shows strong market potential.
While its dividend annual yields, just 0.25%, don’t offer much, DigitalBridge invests across asset classes that could show strong future growth. Coming off of several difficult years, DigitalBridge stock prices have increased over 1.3% in the last year, although it still suffered a loss of value in the past five years. It could be considered as a long-term buy-and-hold option.
Where to Invest in Cell Tower REITs
Consider investing in cell phone tower REITs through your brokerage account or with the options below.
- Small- to medium-sized investors
- Investors interested in rental income
- Investors looking to diversify
- Buy-ins as low as $100
- Open to non-accredited investors
- Offers ownership shares in real property (and all the tax benefits)
- Multiple ways to earn dividends (rental income and property appreciation)
- Great way to diversify portfolio
- Open to self-directed individual retirement accounts (IRAs)
- Detailed analytics and data to help investors make informed decisions and maximize their returns
- Long hold periods
- No secondary market to liquidate shares
Yieldstreet is an online investment platform that specializes in alternative investment offerings designed to generate passive income and wealth for investors. The platform offers a 1-stop shop for a range of alternative investments ranging from real estate to structured notes and even art collections.
- Accredited investors looking to diversify
- Alternative investments to stocks and bonds
- Investors looking for passive income
- Easy-to-use platform
- Carefully selected offerings
- Excellent mobile app
- Full spectrum of alternative offerings
- Options for non-accredited investors
- Majority of investments only open to accredited investors
Fundrise is an online real estate investment platform that allows individuals to invest in a diversified portfolio of commercial real estate properties. The platform pools investor funds and uses them to acquire, manage, and sell various types of real estate assets, such as apartment buildings, office spaces, and retail centers.
One of the key advantages of Fundrise is its accessibility to individual investors who may not have the capital or expertise to invest directly in real estate. By pooling funds together with other investors, Fundrise allows individuals to access a diversified portfolio of real estate assets without having to purchase properties on their own.
Fundrise also offers transparency to its investors. The platform provides regular updates on the performance of the portfolio, allowing investors to track their investments in real time. Additionally, Fundrise offers a user-friendly interface that makes it easy for individuals to invest and manage their portfolios online.
- New real estate investors looking to get their feet wet
- Non-accredited investors
- Real estate investors who want a “set-it and forget it”-oriented option
- Investors looking for low-to-moderate cost buy-ins
- Multiple offerings available to non-accredited investors
- Simple menu of investment options
- Can use for IRA contributions
- Incredibly affordable buy-ins
- Low, easy-to-understand investor fee schedule
- Extended hold periods
- Limited secondary market
mogul is a fractional online real estate investing platform that makes it easy for investors to start with as little as $250. Founded by Goldman Sachs alumni with over $10 billion deployed in real estate, mogul provides opportunities to invest in shares of single-family rental properties. Whether you’re interested in short-term, medium-term or long-term rental investments, mogul offers diverse options. The platform boasts an impressive average 18.8% internal rate of return (IRR) and monthly dividends, combined with potential property appreciation and tax benefits. mogul stands out for its quick sign-up process, allowing users to start investing in under 30 seconds. Plus, with two forms of insurance on properties – property and landlord insurance – investors gain additional peace of mind.
- Fractional real estate investing
- Low minimum investment requirements
- Investors seeking passive income with monthly dividends
- $250 minimum investment
- Monthly dividends and property appreciation in real time with tax benefits
- Two forms of property insurance
- Fast sign-up process (30 seconds)
- Yields for properties on platform right now are in the 12-14% range
- High average IRR at 18.8%
- 3% fee with an incremental 2%
- Limited customer service options
- No mobile app yet
Benefits of Investing in Cell Tower REITs
The benefits of investing in cell tower REITs range from the stable growth of this essential utility to growth potential. Here is a summary of the possible pros.
- Essential Role in Wireless Communication: Cell tower REITs support wireless communication networks by providing infrastructure for mobile phone calls, texts, and data services.
- Stable and Predictable Income: Lease agreements with wireless carriers span 10 to 30 years, ensuring consistent income streams. The demand for wireless connectivity and reliance on cell tower infrastructure provide revenue stability.
- Growth Potential: The deployment of 5G, data expansion, and increased mobile connectivity drive growth opportunities. Rising demand for wireless services may require additional towers and infrastructure.
- Limited Operational and Capital Expenditure Requirements: Cell tower REITs lease infrastructure, so they don’t bear significant responsibility for maintenance or upgrades. This results in lower operational and capital expenses compared to other real estate assets.
- Potential for Dividend Income: REITs must distribute a substantial portion of taxable income as dividends, and the predictable income from long-term leases supports attractive dividend yields.
Potential Risks of Investing in Cell Tower REITs
No investment is without risk, and if the list above didn’t emphasize it sufficiently: cell tower REITs have experienced significant losses in recent years. Here are the main risks to weigh for cellular infrastructure REITs.
- Economic Sensitivity: Economic downturns or recessions may reduce demand for new cell tower infrastructure and impact the financial stability of wireless carriers, potentially hindering revenue growth for cell tower REITs.
- Technological Changes: Rapid advancements like the shift to 5G or new communication technologies could reduce the demand for traditional cell towers, affecting revenues and profitability.
- Regulatory Changes: Changes in local, state, or federal regulations, such as zoning laws or environmental restrictions, could limit new tower construction or modifications to existing infrastructure, affecting growth.
- Competitive Landscape: Increased competition in the cell tower industry may pressure rental rates, reducing profitability. Lease expirations pose a risk, as tenants may negotiate lower rates or switch to competitors, impacting long-term revenue stability.
Investing in Communication
With an increasingly interconnected world, there’s no denying that cell phones and cell towers facilitate everyday life in countless ways, and that’s likely to increase in the next decades. Investing in companies that provide the towers and infrastructure to giants like AT&T, Verizon Wireless, T-Mobile, Sprint and U.S. Cellular can offer investors the possibility of stable returns and long-term growth. Consider also the best REIT stocks right now, the best REITs and alternative investments.
Frequently Asked Questions
Why are cell tower REITs down?
Are cell towers a good investment?
What is the future of cell tower leases?
With the rise of 5G networks and the imminent rollout of 6G technology, the demand for cell towers is expected to skyrocket. This means that cell tower leases will continue to be a lucrative investment opportunity for both landowners and telecommunication companies.
The post Best Cell Tower REITs by Alison Plaut appeared first on Benzinga. Visit Benzinga to get more great content like this.