Crown Castle International Corp: The Most Overlooked 5G Stock in the S&P 500

A Top 5G Stock You Likely Haven’t Considered

In the 5G world, big companies get the most attention. So if there’s a 5G stock in the S&P 500 index with a market capitalization higher than $75.0 billion, you’d think everyone would know about it by now.

And yet, many people have never heard of Crown Castle International Corp (NYSE:CCI).

The reason is quite simple. The S&P 500 consists of 11 sectors: communication services, consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, real estate, and utilities.

Given the nature of these businesses, most people would expect to find 5G stocks in the communication services and information technology sectors.

Crown Castle International Corp, on the other hand, is a company with a $78.0-billion market cap that belongs to the real estate sector of the S&P 500. So it’s no surprise that investors searching for 5G stocks rarely come across CCI stock.

Now, you may be wondering how a real estate company has anything to do with 5G.

As it turns out, Crown Castle doesn’t own any apartment buildings or shopping malls like most real estate companies. Instead, it focuses exclusively on communications infrastructure.

To be more specific, Crown Castle’s portfolio consists of more than 40,000 cell towers, about 80,000 on-air or under-contract small cell nodes, and approximately 80,000 route miles of fiber. This makes the company one of the leading providers of shared communications infrastructure in the U.S. (Source: “Company Overview: April 2021,” Crown Castle International Corp, last accessed May 14, 2021.)

With the 5G revolution, Crown Castle’s communications infrastructure is in strong demand.

In fact, even in the 4G world, the infrastructure owned by wireless carriers didn’t provide enough capacity to serve their customers.

And since building new infrastructure is expensive—and can take a long time due to regulatory scrutiny—wireless service providers often choose to lease infrastructure from other companies.

As a result, Crown Castle has built a sizable business catering to this demand.

In a conference call in April, Crown Castle’s president and chief executive officer, Jay Brown, made it very clear how 5G is going to boost the company’s business this year:

Following a period of building excitement and anticipation, we have seen a significant increase in activity as our customers have started to upgrade their networks to 5G at scale. We expect this elevated level of activity to result in a year of outsized growth for Crown Castle as we now anticipate 11% growth in [adjusted funds from operations (AFFO)] per share for the full-year 2021, meaningfully above our long-term annual target of 7% to 8%.

(Source: “Crown Castle International Corporation (CCI) CEO Jay Brown on Q1 2021 Results – Earnings Call Transcript,” Seeking Alpha, April 22, 2021.)

AFFO is one of the key performance metrics for real estate investment trusts (REITs). This is, in part, because AFFO often indicates how much cash a REIT can pay its shareholders through dividends.

That’s right, Crown Castle stock is a 5G stock that pays cash to investors.

I know, since most 5G stock investors are growth investors, dividends don’t seem like much. However, keep in mind that, if a company can pay a steadily increasing stream of dividends, shareholders get to earn cash returns through the ups and downs of the stock market.

And that’s exactly what Crown Castle International Corp has been doing. Over the past five years, CCI stock’s quarterly cash payout went from $0.885 per share to $1.33 per share, translating to a total increase of more than 50%. Going forward, management is targeting a long-term dividend growth rate of seven to eight percent annually.

At its current share price, Crown Castle stock offers an annual dividend yield of three percent.

The business has been growing, too.

According to its latest earnings report, Crown Castle generated $1.4 billion in site rental revenues in the first quarter of 2021, representing a five-percent increase year-over-year. (Source: “Crown Castle Reports First Quarter 2021 Results and Raises Outlook for Full Year 2021,” Crown Castle International Corp, April 21, 2021.)

The company’s AFFO came in at $1.71 per share, which not only marked a 20% increase from the $1.42 per share the company earned a year earlier, but also easily covered its quarterly dividend payment.

Moreover, management has raised their outlook. For full-year 2021, Crown Castle expects to generate site rental revenues of $5.67 billion to $5.72 billion, which, at the midpoint, would mark a seven-percent increase from 2020.

The company’s AFFO is projected to be between $6.74 and $6.85 per share for the year, which, as the CEO said in the quote earlier, would translate to a growth rate of 11%.

Crown Castle International Corp (NYSE:CCI) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

At the end of the day, there are more exciting 5G stocks on the market than Crown Castle stock.

But as a leading provider of shared communications infrastructure in America, Crown Castle International Corp could be one of the hidden gems in the S&P 500.