Infrastructure REITs Project Double-Digit Dividend Growth

The ongoing conversion to 5G is lifting the fortunes of REITs that specialize in cell towers, driving leasing demand for existing multi-tenant towers as these REITs expand their footprints in new 5G infrastructure.

Crown Castle, a REIT with 40,000 cell towers, says it expects the conversion to 5G to again produce double-digit growth of its dividend in 2022.

“We expect elevated levels of tower leasing to continue this year and anticipate leading the industry once again with the highest US tower revenue growth,” Crown Castle CEO Jay Brown said, during the company’s recent conference call.

An 11-percent increase in its dividend capped off a year of surging demand for cell tower leases in 2021 for Crown Castle.

The phase one build-out of new 5G networks saw major US mobile carriers upgrade their existing cell sites to support their new 5G networks. The first phase of the 5G rollout produced a surge in demand for space on Crown Castle’s towers, enabling the REIT to add more tenants to each location and enhance its returns.

T-Mobile recently signed a new 12-year agreement with Crown Castle that includes increased access to the REIT’s cell tower portfolio as T-Mobile expands its 5G network. DISH Network also has a long-term deal with Crown Castle leasing space on 20,000 towers.

The cell-tower REIT also is growing its footprint in smaller cells—barely larger than old postal service mail boxes—that are being deployed in neighborhoods throughout the US to support 5G networks.

Crown Castle has activated 55,000 5G cells and has another 60,000 in its pipeline. Verizon has committed to lease 15,000 new small cells that Crown Castle plans to install within the next four years. T-Mobile’s deal with Crown Castle also includes access to the REITs small cells.

Brown said Crown Castle expects to deploy 5,000 small cells this year and more than 10,000 per year beginning in 2023. The REIT also expects 5G to increase demand for its fiber-optic cable assets, which include 80,000 miles of fiber spread across every major US market.

American Tower, a REIT with a global footprint of multi-tenant cell towers including 43,000 in the US, repositioned itself to maximize revenue from the 5G conversion with its recent $10.1-billion deal to acquire CoreSite.

When the deal was announced in November, American Tower said it would use CoreSite’s 25 data centers as the anchor of a new “differentiated” communications platform to accelerate global 5G deployments.

American Tower CEO Tom Bartlett said the REIT intends to be at the forefront of a rapidly evolving digital infrastructure ecosystem that is emerging from an accelerating convergence of wireless and wireline networks.

“We expect the combination of our leading global distributed real estate portfolio and CoreSite’s high-quality, interconnection-focused data center business to help position American Tower to lead in the 5G world,” Bartlett said, in a statement announcing the CoreSite acquisition.