A pretty quiet week as I try not to overreact to market gyrations, so we’ll be briefer than usual this Friday… but there are a few interesting things to talk about….
Crown Castle (CCI) reported a “beat and raise” quarter this week, if just barely. They raised their dividend roughly as expected this week, bumping the payout up 7% to $1.20 per quarter, which at $137 is a 3.5% yield. They anticipate that they will be able to continue to grow the dividend at 7-8% a year, which is decent, and it’s encouraging that they continue to see very strong demand for their towers and are pushing forward with another year of very large investments in building their small cell network in 2020, which must mean they’re seeing future demand for that small cell network with some clarity. These “specialty” REITs (cell towers, data centers, etc.) are all quite expensive these days, and to some extent the REITs act as bond proxies thanks to the painfully low interest rates available to income investors, so there’s certainly interest rate risk embedded across the dividend-focused part of the market… but I still really like the underlying growth, the US focus and the small-cell focus, and the above-average yield offered by CCI (as I noted when covering an AMT tease not long ago, that preference for CCI over AMT and SBAC has been wrong recently, CCI has underperformed, but I still like it).
Crown Castle is also involved in an SEC conversation regarding their capitalization and expense policies, and yesterday they disclosed that they actually received a subpoena (and are fully cooperating), so there’s some risk that there could be changes to their accounting if the SEC finds anything they don’t like. I don’t really know what the risk is there, but they have been talking with the SEC for a while and so far, at least, investors appear completely unconcerned. I think this is a valuable sector to own, given the multi-year tailwind of the 5G buildout that should increase demand for both tower and small cell leasing, but it’s also an expensive sector so I’m not rushing to add to my CCI holdings after another solid quarter and dividend raise. Hopefully I’ll get the chance to add the next time the market takes a tumble, or, perhaps, if the SEC conversation becomes more worrisome and investors get scared.
In terms ...