Highly specialized real estate investment trust (REIT) Crown Castle (CCI 4.97%) was a highly sought-after stock Thursday. It closed 5% higher on the day thanks to a very solid set of quarterly earnings figures.
As we all know, investors sometimes overreact to company news that is either sharply negative or highly positive. The post-earnings pop in this case, however, was an entirely appropriate reward.
Crowning achievements
After market hours Wednesday, Crown Castle called in with its fourth-quarter numbers. Although its total revenue declined by 5% year over year, the cellphone tower landlord still edged past the average analyst estimate. Similarly the company’s adjusted funds from operations (AFFO) — considered the most important profitability line item for REITs — also saw a slight drop, yet still managed to beat the consensus projection.
Hidden behind the total top-line figure was an increase in its core site rental revenue, which inched up by nearly 2%. That might not be an impressive number on its surface, but keep in mind that mobile networks are well established by now, and it isn’t easy to lift the take from such an activity; management has certainly earned some kudos for the increase.
More importantly, it is also doing an effective job keeping Crown Castle’s high-yield dividend alive. The company pays out its shareholders at a 5.9% rate, which easily eclipses not only the average dividend yield of the S&P 500 index, but it’s competitive with many other REITs (which are, to quickly point out, obligated to dispense at least 90% of their net profits to shareholders in the form of dividends).
Mature and profitable
It’s clear Crown Castle knows how to squeeze out a buck from this mature business (although it must be said that the long-tail 5G upgrade programs have been a benefit lately). Although the company anticipates further declines in fundamentals, these are not significant enough to be concerning, and that high-yield dividend should at least remain intact.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Crown Castle. The Motley Fool has a disclosure policy.
