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2 Real Estate Stocks to Profit from 5G


Jul 13, 2020 by Matthew DiLallo

Mobile communications technology is continually evolving. It's about to enter the next stage of its evolution as the industry transitions to its fifth-generation technology platform, known as 5G. The shift will require significant infrastructure buildout because the backbone system consists of many small antennas spaced closer together instead of the current network of large cell towers.

This transition has big implications for the real estate sector since many companies focus on owning tech-related real estate, like cell towers and data centers. Several of these companies are already at the forefront of driving the rollout to 5G, making them great ways to potentially profit from this trend. Two of these leading real estate plays are infrastructure REIT Crown Castle (NYSE: CCI) and data center REIT Equinix (NASDAQ: EQIX).

Crown Castle and 5G

Crown Castle is one of the leading infrastructure REITs. The company owns 40,000 cell towers in the U.S., which are crucial to supporting the current industry-standard 4G platform. In addition to that, the REIT has been at the forefront of building out 5G-related infrastructure, like small cells and fiber optic cable. It has installed more than 70,000 small cells on street lights, utility poles, and slim line poles to boost coverage and 80,000 miles of fiber to support its customers' transition to 5G.

The REIT sees lots of 5G-related growth ahead. In its first-quarter earnings release, CEO Jay Brown stated that "we look forward to what will likely be another decade-long investment cycle for our customers with the deployment of 5G." Because of that, the company believes it can grow its dividend -- which currently yields an above-average 2.8% -- by 7% to 8% per year. That 5G-powered income growth makes Crown Castle an enticing way to invest in the real estate of 5G.

Equinox and 5G

Rapidly rising data consumption is one of the drivers of the need to upgrade to faster 5G technology. While real estate companies like Crown Castle are facilitating the rollout of front-end 5G infrastructure to transmit this data to consumers, others like Equinox support the increased need for data storage capacity at the back end by building out more data centers.

Equinix is also building centers specifically tailored to support 5G. Last month, the company announced that it would invest $142 million on the construction of a new data center to expand its presence in Dallas. As part of this investment, Equinox planned to build a 5G Proof of Concept Center. This facility will provide an environment for mobile network operators, cloud platforms, technology vendors, and others to directly connect with its leading data center platform in the region to test, demonstrate, and accelerate the deployment of 5G.

As a leading owner and developer of data centers, Equinix has built an unparalleled strategic position that should benefit from the transition to 5G, which will likely drive even more data demand in the future. That should enable Equinix to continue expanding its data center portfolio and rapidly grow its 1.5%-yielding dividend.

Real estate will play an important role in 5G

5G appears to be the next mega-trend in technology. Because of that, it should be a major growth driver for technology-related real estate companies, with REITs like Crown Castle and Equinix at the forefront. That makes them great ways to profit from the rollout of 5G.

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Matthew DiLallo owns shares of Equinix. The Motley Fool owns shares of and recommends Crown Castle International and Equinix. The Motley Fool has a disclosure policy.

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