Artificial intelligence has been grabbing headlines, but there’s a dark horse among technological advancements that also deserves investors’ attention: Thanks to 5G network availability and more affordable access, 5G technologies are in demand in 2024.
5G is the next-gen mobile internet that’s still in the process of rolling out to supplant 4G, offering ultra-fast speeds and lower latency, or the communication time between devices.
At the end of 2023, 20% of all worldwide mobile subscriptions were 5G-based, amounting to 1.6 billion 5G users worldwide, according to Ericsson. That represents a 63% year-over-year growth rate. By 2029, more than 5 billion people will be using (and paying for) 5G network access, representing about 85% of the global population.
“5G is one of the key digital revolution trends in the connectivity world. It’s the next generation of wireless network technology,” says Sergey Dluzhevskiy, portfolio manager at Gabelli Funds in White Plains, New York. “It’s expected to enable massive digital transformation going forward.”
5G is expected to provide super-fast data speeds in excess of 1 gigabit per second (with peak rates up to 10 gigabits), ultra-low sub-1 millisecond latency and the ability to connect up to 100 times more devices than today’s 4G networks, Dluzhevskiy says. “Key drivers for the development of 5G include rising demand for broadband over mobile networks as well as a provider of services for the Internet of Things,” he says.
With interest in 5G skyrocketing in early 2024, investors are lining up to kick some tires on 5G stocks, with familiar names topping the list. Meanwhile, major carriers are focused on fixed wireless home broadband, the workhorse platform for their 5G fortunes.
“In the U.S., the two wireless carriers actively scaling their fixed wireless businesses are T-Mobile and Verizon,” Dluzhevskiy says. “At the end of December 2023, they had nearly 7.9 million fixed wireless home broadband customers between them, adding about 3.8 million connections during the year.”
Here’s a closer look at T-Mobile US Inc. (ticker: TMUS) and Verizon Communications Inc. (VZ), as well as four other rising 5G stocks that also happen to pay decent-to-excellent dividends. As with any potential stock addition to your portfolio, it’s important to research the individual companies to see if they’re a fit.
Verizon Communications Inc. (VZ)
Closing at $40.35 per share on March 5, VZ stock is up 8.8% on a year-to-date basis. That’s soundly above the performance of the S&P 500, which has returned 6.5% in the same time frame. Verizon also offers a whopping 6.6% dividend to shareholders, making it a popular landing spot for income-minded investors.
Verizon’s 5G network has more than 200 million users, and its fixed wireless access subscribers have risen to over 3 million.
In the meantime, Verizon is partnering with high-profile brands like Amazon Web Services and IBM to develop 5G apps in critical sectors like automation, cloud-based gaming and drone technologies.
Like Verizon, TMUS is partnering with industry leaders to expand its sprawling 5G connectivity network. Last year, T-Mobile teamed up with Comcast Corp. (CMCSA), buying up 5G airwaves from the telecom giant in a deal estimated between $1.2 billion and $3.3 billion, depending on the number of market licenses T-Mobile generates. That deal won’t officially close until 2028, leaving T-Mobile to lease 5G airwaves from Comcast in the interim.
T-Mobile also has a head start thanks to its 2020 purchase of Sprint, which gives the company a significant radio spectrum edge over competitors like Verizon and AT&T Inc. (T). The company estimates it will hold up to 8 million fixed broadband subscribers by 2025, connecting its 5G network to 40 million homes nationwide.
“T-Mobile US is one of the companies that is spectrum-rich and should benefit in the 5G world,” Dluzhevskiy says. “As data demand rises and mobile operators look to make 5G networks more ubiquitous and powerful, their need for additional wireless spectrum will increase. Mid-band spectrum (frequencies sitting between 1 and 6 GHz) has emerged as ‘Goldilocks’ spectrum, providing good balance of propagation and capacity. It will likely remain the primary foundational spectrum for 5G over the next decade.”
Standing at $165.90 as of March 5, T-Mobile shares are up 3.9% so far in 2024. Data from TipRanks indicates an average analyst rating of “strong buy” for TMUS stock, with a 12-month price target of $185.73.
AT&T keeps pouring cash into its mobile and fiber networks, promising to spend between $21 billion and $22 billion in 2024 in a March 4 note to shareholders. “The company remains focused on building vital, high-performance network infrastructure for mobile and fiber networks,” AT&T stated.
Like Verizon, AT&T pays a hefty dividend, at 6.5%. It’s also amid a debt-reduction campaign, with net debt down to $129 billion from $169 billion since its WarnerMedia spinoff in spring 2022.
The telecom icon is expanding its 5G network, which has leveraged ultra-fast 5G download speeds to boost U.S. wireless service revenues by 5%. With estimated speeds of up to 100 times faster than 4G networks and big-name investors like billionaire Ray Dalio on board, T looks like a 5G mainstay for years to come.
With a gain of 20.3% year to date, Broadcom is certainly trending in the right direction in 2024. Analysts are bullish on the stock, with Bernstein analyst Stacy Rasgon issuing a “buy” rating. Oppenheimer analysts went the same route, calling for AVGO stock to rise to $1,500 per share from its March 5 closing price of $1,342.75.
Broadcom’s fiscal year Q1 results are due out on March 7, but early estimates have pegged sales growth at 31.5% for the quarter, up to $11.7 billion. Yet overall profits are expected to lag, with analysts calling for earnings per share of $10.29, a slight decline from Q1 2023.
Long a semiconductor leading light, Broadcom has made significant inroads into the 5G market. In 2023, the company inked a deal with Apple Inc. (AAPL) for Broadcom to build 5G radio frequency and wireless connectivity components for the hardware giant. Broadcom also recently purchased software developer VMware, which gives AVGO a big boost in running network connectivity software across fixed and 5G networks.
Broadcom has positioned itself smartly in the 5G space, especially in providing the semiconductor, mobile-technology infrastructure and software connectivity needed for 5G growth. That scenario should help AVGO profit from the spread of 5G going forward.
Known for its graphics processing units, or GPUs, this AI chip-making powerhouse has been expanding in 5G through its AI-on-5G platform, a service that simplifies the deployment of artificial intelligence applications over 5G networks.
The company’s share price is up 73.6% year to date as of March 5 and continues to run hot for shareholders, returning 260% over the past year. Analysts say Nvidia’s calendar-year profit should crest 90%.
Nvidia’s foray into 5G should pay off handsomely, too, but investors may have to be patient.
“After five years of 5G, network coverage and capacity have boomed, but revenue growth is sluggish, and costs for largely proprietary and inflexible infrastructure have risen,” says Ronnie Vasishta, senior vice president of telecoms at Nvidia, in a recent blog post. “Meantime, utilization for 5G RAN is stuck below 40%.”
Vasishta expects a “major reassessment of investment cases for 5G” in 2024, as companies grapple with networking deployments and profit opportunities in the sector.
“The new year will be about aggressively pursuing new revenue sources on the existing spectrum to uncover new monetizable applications,” he says. “(We also) expect to see a holistic reduction of operating expenses as companies leverage AI tools to increase performance, improve efficiency and eliminate costs. The outcome of these initiatives will determine how much carriers will invest in 6G technology.”
American Tower Corp. (AMT)
American Tower is a real estate investment trust, or REIT, with a wireless communications tower portfolio. Towers are a critical and stable part of the wireless network infrastructure, a source of the company’s long-term staying power.
The company is well positioned to benefit from broadband growth that is part of the national infrastructure expansion. With many towers in rural areas, the company seems primed to capitalize on the push to deliver broadband services in more remote locations.
“American Tower owns tower infrastructure that carriers require to deploy 5G networks, so they stand to benefit from ongoing buildouts,” says Leo Smigel, founder of Analyzing Alpha, an algorithmic trading firm in Mars, Pennsylvania.
Adding to its appeal for income investors, AMT’s dividend yield is a respectable 3.3%.
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