Top 5G Infrastructure Stocks to Watch in 2022

These 5G Infrastructure Stocks Look Bullish

When it comes to 5G stocks, most investors think of big telecom companies like AT&T Inc. (NYSE:T), Dish Network Corp (NASDAQ:DISH), or Verizon Communications Inc. (NYSE:VZ). And for good reason. They’re the companies that have been forking out billions of dollars at mid-band 5G spectrum auctions.

To date, the Federal Communications Commission has raised over $100.0 billion from its 5G spectrum auctions, and that momentum is expected to continue over the coming years. (Source: “5G Stocks to Watch Following the Latest Spectrum Auction,” Forbes, January 19, 2022.)

But when it comes to long-term investment gains, 5G infrastructure stocks might be a better choice than big telecom stocks. The growth for 5G infrastructure stocks is expected to be robust, as 2022 is the year that 5G service is expected to finally go live on a meaningful scale.

Three 5G infrastructure stocks that investors might want to consider are American Tower Corp (NYSE:AMT), Crown Castle International Corp (NYSE:CCI), and Digital Realty Trust, Inc. (NYSE:DLR).

American Tower Corp

The demand for connected devices has been soaring, and data usage per customer has also been soaring, thanks to data hogs like “Facebook,” “Netflix,” and “YouTube.” That has helped drive the demand for wireless infrastructure, including communication towers.

This is what makes 5G infrastructure companies like American Tower Corp so compelling. The Boston, MA-based real estate investment trust (REIT) has a global portfolio of more than 219,000 communication sites. (Source: American Tower Corporation: An Overview, Third Quarter 2021,” American Tower Corp, last accessed January 24, 2022.)

American Tower leases out space on its towers and the land it sits on to wireless service providers like AT&T, Verizon, and T-Mobile US Inc (NASDAQ:TMUS).

One of the biggest benefits of owning wireless communication towers is the economy of scale. Once the tower is there, leasing out unused space doesn’t really cost the owner anything. Adding more tenants generates extra revenue, with the owner’s costs remaining relatively flat.

It all comes down to economy of scale. The return on investment with one tenant per tower is three percent, and it jumps to 13% with two tenants and to 24% with three tenants.

As a REIT, American Tower legally has to distribute the vast majority of its earnings to investors in the form of dividends. As of this writing, American Tower stock provides a quarterly dividend of $1.31 per share, for a yield of 2.2%. (Source: “Dividend History,” American Tower Corp,” last accessed January 24, 2022.)

Best of all, American Tower has raised its dividend every quarter since the first quarter of 2012—even during the COVID-19 pandemic.

Crown Castle International Corp

Crown Castle International is the largest provider of shared communications infrastructure in the U.S., having a presence in every major U.S. market.

The company has more than 40,000 cell towers, approximately 80,000 on-air or under-contract small cell nodes, and more than 80,000 route miles of fiber. (Source: “Company Overview: October 2021,” Crown Castle International Corp, last accessed January 24, 2022.)

Crown Castle International owns the real estate that mobile users need. The REIT leases out space on its towers to wireless service providers, which install equipment to support their wireless networks.

The company hikes its rents by about three percent each year, giving it a steady and reliable revenue stream.

In early January, Crown Castle International Corp announced a new 12-year agreement to give T-Mobile increased access to Crown Castle’s towers and small cell locations.

Since the company is a REIT, Crown Castle stock is appropriate for income investors. Its current quarterly dividend is $1.47 per unit, for a yield of 3.2%.

Digital Realty Trust, Inc.

Another great 5G infrastructure stock that investors should keep on their radar is Digital Realty Trust, Inc. The company is a landlord to the stars of the tech and 5G world.

Digital Realty acquires, develops, and operates data centers for customers in a range of industries, including 5G. artificial intelligence (AI), cloud services, communications, financial services, gaming, health care, information technology, Internet of Things (IoT), and social networking. (Source: “Investor Presentation: September 2021,” Digital Realty Trust, Inc., last accessed January 24, 2022.)

Digital Realty has more than 4,000 customers globally. Its top 10 customers are a who’s who of data hogs, including IBM (NYSE:IBM), Meta Platforms Inc (NASDAQ:FB), and Oracle Corporation (NYSE:ORCL).

In early January, Digital Realty entered a definitive agreement to acquire a majority stake of Teraco Data Environments, Africa’s leading colocation provider, for approximately $3.5 billion. (Source: “Digital Realty to Acquire Teraco,” Digital Realty Trust, Inc., January 3, 2022.)

Like the two other 5G infrastructure stocks reviewed above, Digital Realty is a REIT. The company has raised its dividend for the last 16 years. Over that period, Digital Realty stock’s dividend has expanded at a compound annual growth rate (CAGR) of 10%.

Digital Realty Trust, Inc. currently pays a quarterly dividend of $1.16 per share, for a yield of three percent.

Analyst Take

There are many ways to take advantage of the 5G revolution.

One of the more interesting avenues is 5G infrastructure stocks, including communication tower stocks and data center stocks. As discussed above, three companies worth investigating are American Tower Corp, Crown Castle International Corp, and Digital Realty Trust, Inc.