Crown Castle International Corp: 3.3%-Yielding 5G Stock Reports Strong Q3

Crown Castle Stock’s Dividend Rises by 11%

In addition to crippling the global economy, the coronavirus pandemic has held back the deployment of 5G technology. But with the global economy picking up steam, the deployment of 5G is expected to ramp up as more wireless frequency spectrum auctions take place.

This will be a boon for 5G communication infrastructure companies like Crown Castle International Corp (NYSE:CCI).

A real estate investment trust (REIT) that provides shared communications infrastructure (towers, small cell, and fiber), Crown Castle has been on a solid growth trajectory for the last number of years. In fact, CCI stock’s share-price gains were only upended by the COVID-19 pandemic.

Crown Castle stock has erased all of its pandemic-related losses and has gone on to hit a number of new record highs. It’s currently up by 16% year-over-year and 65% since bottoming in March 2020.

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CCI stock has been benefitting from the growing demand for small cells and the infrastructure necessary for everything from 5G networks, to the Internet of things (IoT), to smart cities.

Crown Castle International Corp recently reported another strong quarter of financial results, which allowed the company to raise its annual dividend by 11%.

Since 2017, Crown Castle has grown its dividends at a compound annual growth rate (CAGR) of nine percent. And there’s no reason to believe it won’t continue raising its dividends.

The company has increased its payout every year since 2014. Even during the worst economic crisis in 100 years, Crown Castle International Corp raised its quarterly dividend by seven percent to $1.20 and maintained that level throughout 2020.

The company has since declared two additional dividend hikes. Most recently, in October, Crown Castle increased its quarterly dividend by 11% year-over-year to $1.47 per share. (Source: “Crown Castle Reports Third Quarter 2021 Results, Provides Outlook for Full Year 2022 and Announces 11% Increase to Common Stock Dividend,” Crown Castle International Corp, October 20, 2021.)

Chart courtesy of StockCharts.com

CCI Stock Overview

Crown Castle is the country’s largest provider of shared communications infrastructure, with more than 40,000 cell towers, approximately 80,000 on-air or under-contract small cell nodes, and more than 80,000 route miles of fiber. (Source: “Company Overview: October 2021,” Crown Castle International Corp, last accessed November 17, 2021.)

The company has a presence in every major U.S. market.

Crown Castle owns the real estate that mobile communications providers need to get their wireless technology out to the masses. The company leases out space on its towers to wireless providers, which install equipment on the towers to support their networks.

Crown Castle International Corp hikes its rent by about three percent per year, giving it a steady and reliable revenue stream and cash flow.

One of the biggest benefits of owning wireless communication towers and small cells is the economy of scale.

Adding additional tenants, equipment, and upgrades generates additional revenue, with costs to the owner remaining relatively flat. The tower is already there; Crown Castle International Corp simply leases out the unused space.

Moreover, the 5G base tower market is projected to expand at a CAGR of 32% over the next few years. (Source: “Global 5G Base Station Market Outlook 2019-2028F – Market Is Anticipated to Grow by a CAGR of Approx 32%,” GlobeNewswire, March 9, 2021.)

Another Strong Quarter of Results

For the third quarter ended September 30, Crown Castle announced that its site rental revenue increased by eight percent year-over-year to $1.5 billion. (Source: “Crown Castle International Corp, October 20, 2021, op. cit.)

Its income from continuing operations in the quarter went up by 115% year-over-year to $351.0 million. The company’s adjusted funds from operations (AFFO) per share increased by 13.5% year-over-year to $1.77.

Crown Castle International Corp said its financial growth was a result of robust tower leasing activity, which is expected to continue in 2022.

The first phase of the 5G build-out in the U.S. resulted in record tower application volumes this year and an expectation of a 20% year-over-year increase in core leasing activity by the company’s tower segment for full-year 2022.

The company’s expected level of core leasing activity for 2022 is approximately 50% higher than the trailing five-year average for Crown Castle’s tower business.

Analyst Take

Crown Castle International Corp is the county’s biggest provider of horizontal and vertical real estate to wireless companies. Not only that, it’s 100% focused on the U.S. market.

Crown Castle’s low risk profile provides it with a growing, stable property portfolio and reliable revenue. Thanks to its diverse offering of towers, small cells, and fiber, the company is well positioned to benefit from network densification.

All that bodes well for holders of Crown Castle stock.