Cell Tower REITs: Top 5 Picks and How to Invest

With increasing dependence on cell phone communication, cell towers are here to stay, arguably as essential for daily life as power plants or municipal water supplies. With the rise of 5G and advancing technological adaptations that increase dependence on cell phones, cell tower real estate investment trusts (REITs) offer investors the opportunity to earn on physical cell phone towers and related infrastructure. Read on to understand key benefits and find some of the best cell towers REITs this year. 

What Are Cell Tower REITs?

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 (July 2023) of $85 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 30% increase in stock value over the past five years and 3.44% 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. With a current market cap of over $24 billion, SBA Communications has seen share prices increase 38.7% in the past five years. Although it pays one of the lowest dividends on the list — just 1.51% — 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 $47 billion, it's smaller than competitors, but with a 5.73% annual dividend yield, it also offers higher dividends. While it has experienced a loss in stock valuation over the past five years, one-year and six-month reporting periods, there is still an opportunity for significant long-term growth and recovery. 

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 $1.1 billion, losses in stock value over the last six months, one year and five years (from over $20 in 2018 to just over $4 now) are at least somewhat balanced by 12.90% annual dividend yields. 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 0.24%, 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 60% in the year to date, although it still suffered a loss of value in the past one- and five-year reporting periods. 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 play a crucial role in supporting wireless communication networks. They provide the infrastructure that enables wireless carriers to provide reliable coverage and capacity for mobile phone calls, text messages and data services.

Stable and Predictable Income

The lease agreements with wireless carriers often span several years, typically ranging from 10 to 30 years or more. This long-term contractual nature of the leases provides cell tower REITs with stable and predictable income streams. The consistent demand for wireless connectivity and the reliance on cell tower infrastructure contribute to the stability of their revenue.

Growth Potential

As wireless technology advances and the demand for mobile connectivity continues to rise, cell tower REITs have the potential for growth. The deployment of 5G networks, expansion of data usage and increasing demand for wireless services can drive the need for additional cell towers and infrastructure, presenting growth opportunities for these REITs.

Limited Operational and Capital Expenditure Requirements

Cell tower REITs typically lease their infrastructure to wireless carriers, reducing their operational responsibilities. They do not need to invest heavily in maintaining or upgrading wireless equipment, as that responsibility falls on the wireless carriers. This can result in relatively lower operational and capital expenditure requirements than other real estate assets.

Potential for Dividend Income

Like other types of REITs, cell tower REITs are required to distribute a significant portion of their taxable income to shareholders in the form of dividends. The stable and predictable income generated from long-term lease agreements allows cell tower REITs to potentially provide attractive dividend yields to investors.

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. When investing in cell tower REITs, you could face losses from operational issues, natural disasters or economic sensitivity. Here are the main risks to weigh for cellular infrastructure REITs.

Economic Sensitivity

Economic downturns or recessions can affect the demand for new cell tower infrastructure and the financial stability of wireless carriers. During periods of economic uncertainty, cell tower REITs may face challenges in maintaining or growing their revenues.

Technological Changes

Rapid technological advancements, such as the shift to 5G or the emergence of alternative communication methods, could reduce the demand for traditional cell towers. If the demand for cell tower leases declines significantly, it may negatively impact the revenues and profitability of cell tower REITs.

Regulatory Changes

Regulatory changes at the local, state or federal level can have an impact on the cell tower industry. For example, zoning regulations, environmental restrictions or changes in telecommunications policies may affect new tower construction or the ability to modify existing infrastructure. 

Competitive Landscape

The cell tower industry is competitive, and new players may enter the market, or existing competitors may expand their infrastructure. Increased competition could put pressure on rental rates and potentially affect the profitability of cell tower REITs.

In addition, cell tower leases typically have fixed terms, often ranging from 5 to 30 years. When leases expire, there is a risk that tenants may renegotiate for lower rental rates or choose to relocate to other sites or competitors. 

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 REITsand alternative investments.

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