The gradual rollout of 5G technology in the United States will play out over the next few years and will create some great opportunities for investors. In this Fool Live clip, recorded on Sept. 13, Fool.com contributors Matt Frankel, CFP, and Jason Hall discuss how real estate investment trust Crown Castle (CCI 0.11%) could be one of the biggest winners.
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Matt Frankel: This is Crown Castle, ticker symbol is CCI. Crown Castle is the second largest publicly traded real estate company in the United States. Market cap about $82 billion. The biggest difference between American Tower (AMT -0.19%) and Crown Castle is Crown Castle is exclusively focused on the US market -- exclusively. They own 40,000 cell towers, 80,000 of those small cells that I was mentioning, and about 80,000 miles of fiber optic network, all in the United States. Great dividend stock yields, almost 3% right now. I rank this higher than American Tower because the 5G deployment I see happening a lot faster here, wireless investment in the U.S. has just been fantastic in recent times. Just like last time, I'm going to share my screen for a bit. If you don't like all these slides shows, then sorry. But here's why I like Crown Castle better than American Tower. Look at them. The first chart there, U.S. wireless capital investment. 18% of global wireless investment has been in the United States since in 2020 compared to just having 4% of the population. Look at the second one, mobile data usage. This is a good parameter of the need for wireless infrastructure, 108 times as much mobile data is flowing in the US in 2020 versus 2010, 108 times as much. In 2020, this wasn't the stone age. Smartphones were already pretty widespread at that point. This was three years after the iPhone debuted. That's a pretty big jump.. The reason is sophistication of data is getting much, much more overtime. I want to say 3G was out in 2010. I don't know if either of you guys remember that, but I think 3G was rolling out around that point. 4G enabled multiples of the data sophistication of 3G and 5G is multiplying it again. This 2020 numbers were barely any 5G rollout included in there. Looking at the cell site growth, about 150,000 cell sites in 2010, 417,000 in 2020. They estimate that by 2026, we will need as many as one million just small cells, not towers, one million small cells in the united states. A lot more room to grow this, and it's going to grow quickly, which is I think why I rank this above American Tower. With that in mind, let me stop my share for a second. Great track record. They are predicting 12% FFO growth going forward. They've been able to raise their dividend at a roughly nine percent per year over the past several years. They expect to be able to sustainably raise their dividend by 7%-8% per year in perpetuity. This is not only a great income stock yield on those 3%, they expect to give their shareholders very nice raises every year. The small cells are driving growth, and these are little transmitters that you could put even on a billboard, on a street light. There's a lot of small cells. This is what powers the cell infrastructure in places like Manhattan where you can't build a big, ugly cell tower every few blocks, you have to rely on these small cells to do it. That's really where the growth is going in the U.S. the number of connected devices in the U.S., not only the 5G rollout. Think of how many devices you have that are connected to wireless services right now compared to 10 years ago. I can look around and feel like five of them just in my house. The number of connected devices right now sits at about 590,000 in the US. That's going to go up to 858 million by 2026, in five years. Lot of growth potential for this one, and it's a lot of quick growth potential, if you want just long tailed growth throughout the world, American Tower's the way to go. If you want a quick play on US 5G infrastructure, that's why I like Crown Castle a little bit better. I'll shut up after that.
Jason Hall: A couple of things I want to point out. I think a lot of folks might not know that with 5G, the small towers are far more prevalent because its technology, depending on the provider. The signal doesn't travel as far, you just need more cells to get coverage. I think for both Crown Castle and American Tower, that's a positive aspect. Matt, for me, when I was just looking at these two businesses, just the basic math tells me Crown Castle, just you think of the multiple that American Tower trades for, and Crown Castle is not. It's a smaller business, but in terms of where the market is valuing it as a much smaller business that it is compared to American Tower. I think that alone, that valuation premium makes it more compelling to me.