Yes, The 5G Revolution Is Still Happening (Plus: A No-Brainer Pick)
Whatever happened to the whole 5G thing?
It seems like just a couple of years ago, we were told that 5G was going to change our lives. In fact, I was one of those people.
The truth is, while the 5G rollout continued, a few little things happened in the world that pulled our attention away from this technology trend.
I’m referring to Covid-19 primarily, of course. But there was also a contentious election, record high gas prices and inflation, a war in Ukraine, the list goes on.
But make no mistake, the march toward 5G continues. And investors would be well served to put it back on their radar. Because — stop me if you’ve heard this before — the long-term implications are huge.
5G: A Recap
In case you’ve forgotten, let’s take a moment to cover what exactly 5G is and what that means for us.
5G is about more than just better and faster cell phone coverage. That’s nice, of course, though. 5G is be anywhere from 10 times to 100 times faster than 4G. You’ll be able to download a season’s worth of your favorite TV show in a matter of seconds, for example.
But this next generation of wireless technology has endless applications. And the real game-changer is the low latency. Latency is the response time between when you click on a link or start streaming a video and it actually starts happening. When we do this, a request gets sent to the network, and the network needs to decipher it and respond.
Most of the time, we don’t even notice this latency — unless reception is bad or something. With 4G, latency is around 20 milliseconds. That’s fast. But 5G can reduce this to as little as 1 millisecond. This is where things get interesting, because it opens up a whole new world of possibilities.
At this rate, we’re talking practically “real-time” input and feedback. This means things like remote surgery are now a possibility. Or truly autonomous driving. Artificial intelligence. You name it.
Prepare to have your mind blown in the years to come.
A No-Brainer Pick For 5G
The total global 5G market is expected to reach $277 billion by 2025. There’s likely a small company out there that we’ve never heard of that will become a household name, and a multi-billion-firm, because of 5G.
But it does come at a cost…
We can’t simply flip a switch to turn on 5G. All these devices connected to the internet will demand an enormous amount of bandwidth. Our current infrastructure can’t meet the requirements needed.
That’s where companies like Crown Castle International (NYSE: CCI) come in.
Headquartered in Houston, Texas, CCI is a real estate investment trust or REIT that provides access to wireless infrastructure via long-term contracts. In other words, it likely owns the infrastructure that’s powering your cell signal. It simply leases it out to communication firms like AT&T, Verizon, T-Mobile, and other carriers.
It’s the leading provider of shared communication infrastructure in the United States. It has over 40,000 towers, over 80,000 miles of fiber lines, and about 115,000 small cells (which bolster capacity in high-demand areas).
Most investors are overlooking Crown Castle as a viable 5G play because it’s not an exciting small-cap company creating the next breakthrough technology. But it doesn’t have to sink the resources and capital required to find that next game-changing technology, because its infrastructure forms the foundation of this 5G upgrade.
Plus, Crown Castle’s desirable portfolio allows it to churn out consistent sales and cash flow — both of which will likely get a boost as 5G rolls out.
Over the last five years, CCI has grown revenue at a 10% average annual clip. In 2021, it pulled in more than $6.3 billion in sales, and it’s on track to bump that figure up to around $6.9 billion for 2022. Operating income came in at more than $1.8 billion in 2021, giving it a sound 31.9% operating margin.
In 2021, funds from operations (FFO) — a figure used by REITs to define cash flow from operations — was more than $2.7 billion, or $7.16 per share. That $2.7 billion in FFO divided by its annual sales of over $6.3 billion gives us a cash profit margin of roughly 43%. This means for every $1 in sales, $0.43 is straight profit that can be attributed to shareholders. That’s incredible.
In the last four quarters, Crown Castle has returned more than $2.3 billion to shareholder in the form of a cash dividend. Its annual dividend of $5.88 per share, gives the firm a nice dividend yield of 3.25%, topping the meager 1.5% offered by the S&P 500. (One thing to note is that REITs receive favorable tax treatment so long as they pay out at least 90% of its taxable income as dividends. The tax burden gets passed onto shareholders, meaning dividends are taxed as ordinary income for shareholders.)
What’s more, the company has grown that dividend by 52% over the last five years. That’s exceptional growth and shows the firm’s commitment to shareholders.
Action To Take
I realize this may not be big news for some of you. But it’s worth putting 5G back on your radar. Because even though we’re well into the rollout, we have yet to see it reach its full potential.
To put it simply, it will enable us to do things that were unfathomable just a few years ago.
This new standard will bring a windfall of profits to a number of companies. And Crown Castle is sitting in a nice position to benefit greatly from this 5G evolution. That’s no secret.
The stock offers a nice combination of growth and income. But if you’re looking for a little more upside potential, then you need to know that 5G could very well help enable the next big “disruptive” trend on my radar…
I’m talking about flying cars.
I know… It sounds like science fiction. But I can assure you that it’s much closer to becoming a reality than you think. They’re ready to hit the skies and change daily life as we know it.
Major aviation firms are lining up behind one company whose ground-breaking flying car technology could be unleashed on the world very soon. Click here for details.