Lamar Advertising Company (LAMR Quick QuoteLAMR - Free Report) is well-poised to benefit from its impressive footprint of outdoor advertising assets across the United States and Canada. A diversified tenant base and opportunistic acquisitions augur well for its long-term growth. However, stiff competition from other outdoor advertisers and a high interest rate scenario are near-term headwinds.

Lamar Advertising enjoys an impressive national footprint and holds a leading position as a provider of logo signs in the United States. The company enjoys a diversified tenant base, comprising tenants from the services, health care, restaurants, retailers, automotive, insurance and gaming categories. Additionally, it sources a significant part of its revenues from local business, leading to less volatility in revenues.

Lamar Advertising has made concerted efforts to upgrade its portfolio over the recent years, increasing occupancy in its existing advertising displays. It holds a significant market share in the U.S. outdoor advertising business. The company offers the largest network of digital billboards in the United States, with more than 4,500 displays as of the end of the first quarter of 2023. Further, its increased focus on bolstering its digital capabilities is expected to drive long-term growth.

Technological advancements in the low-cost, out-of-home (OOH) advertising platform are aiding the shift to outdoor advertising, offering an advantageous condition for Lamar Advertising’s growth. In the upcoming years, higher technology investments are expected to provide further support to OOH advertising.

Additionally, the company’s expansion activities over the recent years bode well for long-term growth. In 2022, it completed 73 acquisitions of outdoor advertising assets for $479.8 million. Further, it closed 11 deals for about $14 million in the first quarter of 2023. It expects acquisition spending in the band of $100-$150 million in the current year.

Solid dividend payouts remain the biggest attraction for REIT investors and Lamar Advertising remains committed to the same. In the last five years, the company has raised its dividend eight times, and its five-year annualized dividend growth rate is 6.06%, which is encouraging. Check Lamar Advertising’s dividend history here.

Over the past month, shares of this Zacks Rank #3 (Hold) company have rallied 3% compared with the industry’s rise of 0.7%.

Image Source: Zacks Investment Research

However, Lamar Advertising faces stiff competition from other outdoor advertisers for customers, display locations and structures. The company also competes with other media, including conventional platforms such as television, radio, print media, direct mail marketers and online, mobile & social media platforms. These competitors have the advantage of cross-selling complementary advertising products to advertisers.

A high interest rate is a concern for Lamar Advertising. Elevated rates imply higher borrowing costs for the company, affecting its ability to purchase or develop real estate. Moreover, the dividend payout is likely to become less attractive than the yields on fixed-income and money market accounts.

Stocks to Consider

A couple of better-ranked stocks worth considering are Ventas (VTR Quick QuoteVTR - Free Report) and EastGroup Properties (EGP Quick QuoteEGP - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ventas’ current-year funds from operations (FFO) has been revised marginally upward over the last 60 days. In the past three months, VTR's shares have rallied 11.8%.

The Zacks Consensus Estimate for EastGroup Properties’ current-year funds from operations (FFO) has been revised marginally upward over the last 60 days. In the past six months, EGP's shares have rallied 18.2%.

Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.