We recently compiled a list of the 12 Best REIT Dividend Stocks To Buy for 2024. In this article, we are going to take a look at where Crown Castle Inc. (NYSE:CCI) stands against the other REIT dividend stocks.
In the United States, real estate investment trusts (REITs) play a significant role in the real estate sector and the overall financial system. Equity REITs pool funds from numerous investors to purchase and manage income-generating properties, such as residential, commercial, and industrial real estate. These REITs are publicly traded on major stock exchanges, allowing investors to earn steady income—primarily from rental revenues—without the need to personally manage or fund the properties. However, REIT share prices can fluctuate and are highly responsive to shifts in interest rates.
The introduction of the REIT structure transformed real estate investing. Over time, REIT indices have adapted to reflect the sector’s evolution. With the growth and increasing significance of new segments, the broader REIT landscape has changed considerably, yet it continues to provide attractive income opportunities. The real estate market has become more diverse, with different segments offering distinct risk and return dynamics.
Also read: 11 Best REIT Stocks To Buy Under $10
It is frequently seen that many investors remain cautious about real estate and REITs, partly due to challenges faced by the retail and office subsectors. Additionally, the sector’s reliance on significant leverage makes it vulnerable to rising interest rates. However, recent performance trends have caught investors’ attention. Over the past three months ending November 2024, investors in the US have allocated around $4.5 billion to REIT and real estate-focused ETFs, surpassing investments in any other sector, according to a report by Bloomberg. This growing interest may be attributed to unique features of the REIT market and broader macroeconomic developments.
According to a report by Nareit, as the third quarter of 2024 begins, it signals nearly two years of disparity between REIT valuations and those of private real estate. Although the gap between the two is gradually narrowing, the prolonged adjustment period still presents a compelling opportunity for institutional investors to incorporate REITs into their real estate investment strategies. The report further highlighted the performance of REITs in recent years. Since 2022, REIT performance has generally moved inversely to changes in the 10-year Treasury yield. In the third quarter of 2024, REITs delivered strong total returns as the 10-year Treasury yield declined, leading to significant reductions in the REIT implied cap rate and narrowing the public-private cap rate spread. However, since the end of the third quarter, a notable rise in the 10-year Treasury yield has caused REIT total returns to decline, likely widening the cap rate spread again.
If this inverse relationship continues, interest rates will remain a key factor in the valuation adjustment process. Narrowing the public-private cap rate gap is crucial for reigniting property transactions and offers real estate investors an opportunity, as it could drive REIT outperformance into 2025. If REITs sustain their momentum and private property investors maintain their gradual increases in appraisal cap rates, the commercial real estate market may finally resolve its valuation disparity between public and private assets.
REITs are an attractive option for income-focused investors. By law, they must distribute at least 90% of their taxable income to shareholders as dividends. Unlike many other companies, REITs typically do not retain earnings, which often results in higher yields compared to other equity investments. According to Tower Financial Group of Wells Fargo Advisors, in 2023, equity REITs offered an average yield of 3.9%, significantly outpacing the 1.4% average yield of stocks in the broader market. In view of this, we will take a look at some of the best dividend stocks in the REIT sector.
Our Methodology:
For this list, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and picked REIT companies that pay regular dividends to shareholders. Next, we narrowed down 12 companies that are popular among elite funds at the end of Q4 and ranked them in ascending order of the number of funds that have stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an array of cell towers on a distant hilltop.
Crown Castle Inc. (NYSE:CCI)
Number of Hedge Fund Holders: 34
Crown Castle Inc. (NYSE:CCI) is a real estate investment trust company that focuses on providing infrastructure for wireless communication. The company owns, operates, and leases a vast network of cell towers, small cell networks, and fiber-optic cables across the US. It has refocused its efforts on higher-return capital projects, leading it to reduce its growth spending plans. The company has also initiated a strategic review of its fiber business. These changes are expected to enhance its cash flow and returns, improving its ability to self-finance organic growth opportunities.
Crown Castle Inc. (NYSE:CCI) reported revenue of $1.65 billion in the third quarter of 2024, which fell slightly by 0.9% from the same period last year. However, the revenue beat analysts’ estimates by $17 million. Net income for the quarter was $303 million, up from $265 million in the same period of 2023. This included $48 million in charges related to the restructuring plan announced in June 2024. The company’s performance was also highlighted by Columbia Threadneedle Investments in its Q3 2024 investor letter. Here is what the firm has to say:
“The fund held two out-of-benchmark positions in Real Estate Investment Trust (REIT) companies American Tower Corporation and Crown Castle Inc. (NYSE:CCI). REITs have historically performed well during periods of declining interest rates due to lower borrowing costs. The two companies performed very well during the third quarter after the Federal Reserve cut interest rates 50 basis points in September, with the expectation for additional cuts soon.”
On November 6, Crown Castle Inc. (NYSE:CCI) declared a quarterly dividend of $1.565 per share, which was in line with its previous dividend. The company remained committed to its shareholder obligation, returning $681 million to investors through dividends in the most recent quarter. The stock has a dividend yield of 6.34%, as recorded on December 12.
As of the end of Q3 2024, 34 hedge funds tracked by Insider Monkey held stakes in Crown Castle Inc. (NYSE:CCI), compared with 38 in the previous quarter. The overall value of these stakes is more than $1.24 billion. Ken Fisher’s Fisher Asset Management was the company’s leading stakeholder in Q3.
Overall CCI ranks 5th on our list of the best REIT dividend stocks to buy for 2024. While we acknowledge the potential of CCI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.