Crown Castle (CCI) and Intuitive Surgical (ISRG) are the first real quarterly updates to hit my portfolio this earnings season — cell tower REIT CCI is usually pretty steady, the movement of shares is typically more about sentiment and interest rates than about any “surprise” earnings, and robotic surgery equipment company ISRG has lately been driven mostly by investor worries about how long it will take to return to “normal” volume of surgeries post-COVID, and whether competition from Medtronic (or others) might take a bit out of future business.

Crown Castle (CCI) “missed” on its Adjusted Funds From Operations (AFFO, that’s their favorite cash flow metric), reporting $1.80 per share when analysts had expected $1.91. Revenue grew by 9.5% from last year, hitting $1.73 billion in the quarter, so that was a little higher than expected. They lowered their overall outlook for 2022 slightly, probably mostly because of interest costs, but they did not change their AFFO forecast for 2022 — that’s still expected to be about $7.36 for the full year. That means they’re generating $7.36 in adjusted cash flow per share, ignoring depreciation, and paying out, at the current dividend rate, 80% of that cash, $5.88 per share, to investors. That’s a much higher payout ratio than we typically see from their major competitor American Tower (AMT), which grows its dividend more quickly but pays out a bit less of its AFFO and therefore has more financial flexibility to fund growth, which is why I’ve typically favored AMT at times when the income yield or the overall valuation of the two is similar.

AMT is currently trading, at $250, at about 25X their expected 2022 AFFO, with a current yield of 2.2%. CCI is trading at 23X expected 2022 AFFO, with a current yield of 3.4%. Both are near the top end of what most people would consider a reasonable valuation range, I expect. CCI has an advantage in the large portfolio of small cell locations they’ve built out to serve 5G customers, and with their higher dividend yield… AMT has an advantage in their more international portfolio of towers (though sometimes that’s a disadvantage, with the dollar strong), and with their growing data center portfolio following the acquisition of CoreSite, and their historically much higher dividend growth rate.

I would still give the edge to AMT when valuations are similar, as they are now, partly ...