Best Cell Tower REITs

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.

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. 

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.

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