Crown Castle (CCI 0.88%) aims to continue years of market outperformance by building out as well as up, and now might be the time to climb aboard this cell tower titan.
There are several reasons CCI stock could be a good buy right now, not the least of which is the company's aggressive investment in the rapid expansion of 5G networks. This real estate investment trust (REIT) is also a passive income machine and its battered stock price could be signaling a solid buy now, especially for those willing to hold on.
Those who did years ago have been well rewarded as Crown Castle rides the wave of cell tower expansion. The major mobile carriers are among the largest tenants of this infrastructure REIT's collection of 40,000 cell towers across the country, and the chart below shows how CCI stock has outperformed the market since the 2007 introduction of the iPhone.
CCI Total Return Level data by YCharts
A prime position in a large addressable market
That's still a growing business. Crown Castle said in its second-quarter 2022 earnings report that 2021 was a record year for tower lease applications and that it expects to grow that revenue stream by 6% this year. But it's what's next that looks particularly promising now for long-term investing.
The company is now building out as well as up. Crown Castle is in the midst of what CEO Jay Brown calls "an important transition year for our small cells and fiber business." That includes the rooftop and utility pole antennas and myriad other equipment types needed to create small cell node networks for indoor and outdoor settings. The company has 110,000 of them in place already and orders for 60,000 more. That's along with 80,000 route miles of fiber-optic cable already in place.
Small cells and the connective network for them is a large addressable market for Crown Castle and its competitors. Grand View Research said in an August report that it expects the global market for small cell 5G networks to post a compound annual growth rate of 77.6% from 2020 to 2027 to handle the soaring demand for the bandwidth for augmented and virtual reality applications and even autonomous vehicles, as well as streaming video and mobile phones and other applications already in place.
A buying opportunity with dividends on the rise
Crown Castle stock has been hammered of late, down about 27% from its all-time high closing price of $205.07 last Dec. 31. That's pushed the dividend yield up to about 3.8% at the current share price of about $154.
Crown Castle has grown its dividend by an annualized 8.5% over the past three years, and the CEO said in that Q2 report that its cell towers, fiber cable, and small cell node investments altogether "extends our opportunity to create value for our shareholders by delivering long-term annual dividend per share growth of 7% to 8%."
Analysts who follow Crown Castle give it a consensus target price of $195.20, a 30% jump from current levels. That makes this stock attractive right now both as an income and growth play.
