Crown Castle International (CCI +2.12%) presents a compelling argument for a long-term buy and hold based on its past performance and positioning to take advantage of opportunities.
This real estate investment trust (REIT) is one of the largest owner-operators of telecommunications infrastructure, leasing space on its cell towers and fast-growing network of fiber cable and small-cell nodes to a long list of customers that range from the major mobile carriers to small local governments.
The Houston-based company went public in 1998 with a portfolio of 133 cell towers and now has more than 40,000 of them, as well as about 115,000 small-cell nodes and 85,000 miles of fiber cable. That growth parallels the surging demand for infrastructure that has seen this passive income machine produce an enviable record of outperformance.
Data by YCharts.
Building for the future while profiting from the past
Crown Castle is currently in the midst of what its CEO, Jay Brown, says is an important transition year for its small cells and fiber business, which centers on low-powered antennas and the carrying capacity critical to the expansion of 5G capabilities through communities and rural areas.
Such capacity is needed to accommodate the growing demand for wireless capacity for both well-established internet uses -- including home television streaming and connected doorbell cameras -- and the expansion of the Internet of Things into augmented reality applications, autonomous cars, and other data-intensive developments surely to come.
One of those developments already taking shape is edge computing, centered on what are essentially mini-data centers near cell towers and rooftop antennas and other pieces of the small cell network, something Crown Castle is beginning to work on now.
NYSE: CCI
Key Data Points
All those applications require rooftop and utility pole antennas, just for starters, and a vast network of transmitters, monitors, and other devices all along that digital watchtower. Crown Castle already has more than 110,000 installed small-cell nodes in place and orders for another 60,000 more. Plans are to install them at a pace of 10,000 a year beginning next year.
All this hardly means the company is ignoring its long-standing tower business. Crown Castle noted in its second-quarter earnings report that it expects to grow by an industry-leading 6% this year.
A good buy at today's levels, with steady income to boot
Crown Castle's stock is now trading at about $170 a share, down about 18% year to date, equivalent to the S&P 500's drop this year. The Street's consensus target price of $196.61 on this equity, and its dividend is yielding about 3.5% for now, just double the 1.7% or so for the big benchmark index.
That's a nice upside, even if it's still below the stock's all-time high closing price of $205.07 from Dec. 31, 2021. And while watching to see if it attains those heights again, shareholders will enjoy a steady flow of passive income that the company's leadership pledges to grow.
Brown said in that Q2 earnings report that his company's ongoing investment gives Crown Castle shareholders "the most exposure to the development of next-generation wireless networks in the best market in the world and extends our opportunity to create value for our shareholders by delivering long-term annual dividend per share growth of 7% to 8%."
