Crown Castle International (CCI 1.12%) presents the classic argument for a buy and hold: a strong company with a great track record in a growth market. And there are reasons to believe that growth could be particularly strong for this real estate investment trust (REIT).
In the past 10 years, a $10,000 investment in this major player in the cell tower industry would have grown to about $38,600 -- a compound annual growth rate of about 14.5% -- and it's currently yielding about 3.5% after raising its dividend for seven straight years.
Furthermore, after hitting an all-time high of $208.74 per share this past Dec. 31, Crown Castle stock is down nearly 20% and trading now at about $172. That looks like a potential bargain to me.
Price alone doesn't make this infrastructure REIT a good buy, but a lot of other factors do, particularly its commitment to the rollout of 5G technology well beyond the reach of those tall towers while embracing emerging technologies as well.
A big business in small cells
Crown Castle has more than 40,000 cell towers across the country, a network that grew along with the rollout of mobile phones themselves. The company also has access to more than 10,000 rooftop sites to extend coverage in areas where towers won't work, like dense urban areas.
What's really powering its growth now are small cell nodes, those low-powered antennas -- typically installed on streetlights and utility poles -- needed to support the dizzying expansion of the Internet of Things, autonomous cars, augmented reality, remote networks of transmitters, monitors, and myriad other devices.
There's also growing demand for high-capacity wires for indoor, outdoor, and mixed-use areas. Altogether, hundreds of thousands of additional small cell nodes will be needed nationwide in the next few years, the company says. It's also now investing in technologies such as Citizens Band Radio Service and edge computing, which involves placing small data centers near cell towers and small cell networks.
Crown Castle already has more than 110,000 small cell nodes in place and a backlog of 60,000 more, and is planning to install 10,000 of them a year in what CEO Jay Brown calls "an important transition year for our small cells and fiber business."
Fiber cable is also a critical part of this rollout and Crown Castle already has 80,000 miles of it. The company is honing its use of micro trenching, in which a trench as little as two inches wide is used to roll out the fiber.
Growing dividends, too
Crown Castle also says it will build on its record of rewarding shareholders for their investment. Brown said in its first-quarter 2022 earnings report that the company expects to deliver 7% to 8% annual dividend growth even as it enables 5G deployment across the country.
As the chart below shows, Crown Castle has more than tripled its dividend payout in the past 10 years, easily outpacing the S&P 500 in total return.
Building toward more towering growth
Crown Castle is in a great position to thrive, with a dominant, specialized presence fulfilling a crucial role in an industry marked by the incessant hunger for more digital capacity and swifter data movement.
I especially like the expansion into small cells and edge networks, along with continued revenue growth from its traditional cell towers, which the company expects to see increase by an industry-leading 6% this year.
The company is not without competition, most notably from American Tower. But between the two, I lean toward Crown Castle because of its emphasis on the fast-growing U.S. market and the diversity of its growth strategies. I own it now and plan to add more going forward.