Citi Sees Dividend Demand Driving Communications Sales & Leasing

The real estate investment trust Communications Sales & Leasing Inc. CSAL may see its shares benefit from a demand among investors for dividends as well as an opportunity to expand, an analyst said Monday.

The company, spun out Monday from Windstream Holdings, Inc. WIN, bills itself as the first REIT focused on acquiring and leasing communication distribution systems.

Citi's Michael Rollins launched coverage on the REIT Monday with a Buy rating and $32 target.

Communications Sales & Leasing, issued at $28.60, changed hands recently at $28.27, down $0.42.

See Also: Windstream's REIT Spin-Out & Reverse Stock-Split - Now What?

Rollins on Monday also maintained a Buy rating on Windstream, with a target of $15.

The REIT's sole tenant so far is Windstream, but says it expects to acquire additional assets and lease them to other local, regional and national telecommunications providers.

Rollins said the company should "urgently pursue diversification" and buy both telecommunications assets as well as assets unrelated to the industry.

The REIT expects to pay an annual dividend of $2.40 a share, and Rollins expects a "favorable demand for dividend yield," in light of currently low interest rates.