Dividend stocks won't help investors get rich quickly. But because only the best companies are able to steadily grow their payouts to shareholders over time, dividend stocks are an investment vehicle with a high chance of helping investors build generational wealth.
Here are two real estate investment trusts (REITs) that appear to be strong buys for investors who want to create significant and lasting wealth.
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1. Iron Mountain
With 1,460 facilities around the world containing 740 million cubic feet of global physical storage volume, Iron Mountain (IRM 2.08%) is a leading records management and storage business. The company is so well-established in its industry that it is trusted by 95% of Fortune 1000 companies.
The REIT's revenue and adjusted funds from operations (AFFO) per share will be stabilized by its records management and storage business moving forward. The core of Iron Mountain's business, involving records management and storage, made up over 60% of its $4.4 billion in total revenue for 2021.
The company's core business is quite reliable, with records typically staying within Iron Mountain's facilities for 15 years. That's because businesses are required to keep certain documents indefinitely, such as business licenses and permits, as well as types of intellectual property issued by the federal government, including patents, trademarks, and copyrights. Along with its leadership status within its industry, this is why Iron Mountain's customer retention rate is astonishingly high at 98%.
Just 1,300 of its 225,000 total customers have migrated to data centers for digitalized records storage so far. This presents a huge growth catalyst for Iron Mountain's data centers business. And the stability of its core business, along with the potential of the data center business, is why Iron Mountain anticipates 8% midpoint AFFO per share growth to $3.76 in 2022.
When paired with the company's mountainous 5.1% dividend yield, this should make Iron Mountain an intriguing stock for both current income and future income. This is especially true given that the company is on the verge of reaching its low- to mid-60% dividend payout ratio target. Once that is achieved, the dividend will grow in line with AFFO per share.
Best of all, Iron Mountain can be purchased at a forward price-to-AFFO-per-share ratio of 12.9 -- hardly expensive given its quality.
2. Crown Castle International
It's a safe bet that many people reading this article are doing so on their smartphones. In fact, a clear majority of web traffic -- 51.4% in the U.S. -- originated from mobile devices in the second quarter of 2022.
With ownership of over 40,000 cell towers, 115,000 small cell nodes, and more than 80,000 route miles of fiber, Crown Castle International's (CCI -0.03%) infrastructure is prevalent throughout the U.S. Major telecom companies lease the REIT's communications infrastructure to broadcast signals to customers, which is how smartphone data is then provided and consumed.
It's difficult to imagine the United States becoming less dependent on smartphones in the future. The general consensus is that quite the opposite will occur. This is why it's anticipated that U.S. monthly mobile data consumption will compound 19.8% annually to 54.2 gigabytes by 2027.
Given this promising industry forecast, Crown Castle is confident that it will be able to meet its 7%-to-8% annual dividend growth target over the long haul. Combined with a 3.3% dividend yield, the stock looks like a great pick for both income and growth.
AFFO is arguably the most reliable profitability and valuation metric for REITs, because it adds non-cash items like amortization and depreciation to net income, as well as subtracting routine maintenance amounts. Crown Castle's forward AFFO multiple of 24.2 isn't a cheap valuation, but it's reasonable for the company's quality and growth prospects.
