Real Estate Investment Trust (REIT) With Better Growth Potential

Harry Domash  |

REITs are a popular choice for investors seeking a steady income stream. However, most REITs operate in slow growth business sectors such as shopping centers and commercial office buildings.

By contrast, Crown Castle International (CCI) owns and operates cell phone towers and other equipment for handling cell phone communications. Spurred by the mushrooming use of wireless devices such as smartphones and tablets to view videos, wireless communications is a fast growing business. With 40,000 towers, CCI is one of the largest players in the U.S.

In its most recent quarter (March), FFO, the REIT version of cash flow, rose 10% over year-ago quarter on a 7% revenue gain.

While CCI is growing revenues and cash flow in its traditional business by building new towers, adding equipment, and increasing rents, its aggressive expansion into the small cell market offers additional growth opportunities.

Small cells are used to connect cell phone and tablet users in dense usage areas such as shopping malls and sports stadiums to wireless networks. CCI’s small cell business, while new, is off to a good start. March quarter small cell revenues rose 35% vs. year-ago, accounting for 7% of total revenues. Further, some analysts say that the small cell market is just in the beginning stages of an explosive growth cycle.

However, the downside is that connecting small cell base stations to national wireless systems requires fiber optic cable networks running through urban areas. In April, CCI, which already owned or had rights to about 7,000 miles of fiber, agreed to pay $1.0 billion to acquire an additional 10,000 miles of cable in major metropolitan areas, significantly expanding its small cell network growth opportunities.

Crown Castle, which converted to a REIT last year, pays a 4.0% dividend yield compared to 1.9% and 0%, respectively, for competitors American Tower (AMT) and SBA Communications (SBAC) . Analysts are forecasting around 10% dividend growth over the next 12 months.


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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

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