Disclaimer: I am not a licensed financial advisor and the following is strictly for entertainment purposes only. I am not suggesting or recommending that anyone take a position in CCI.
As of writing this - I have not held, nor currently hold a position in CCI for at least 30 days. I do not plan to ever take a position in CCI ever again.
I am not a current employee of CCI
To begin the tale, let's go back to when the Fiber companies were purchased. During this time - debt was significantly leveraged at very low short term rates. This allowed maximized returns in profits as the interest expense was low. CCI purchased Lightower through debt and thus we begin our journey.
Decisions were made to lower the escalation on expenses licenses through the use of CPI, while locking in fixed modest gains on revenue based licenses agreements at very long terms. In 2021 during the inflation expanse, CCI became increasing vulnerable towards inflation based expense. This coincided with longer term revenue escalating below the rate of inflation.
As debt became due, the debt needed to be renewed at increasingly higher rates requiring more and more money to finance the massive liability. The Fiber business has a growth rate of significantly less than the cost of servicing the debt of the investment.
Meanwhile, the wireless industry is becoming more and more of a commodity and the major wireless carriers are struggling to offer any competitive advantage other than cost.
The price of CCI is VERY much tied to the dividend yield as most REITS are. Today, the dividend yield sits around 6.8%. Who in their right mind would purchase CCI stock with the yield of 6.8% while there are so many other safer investments paying the same or more with no risk of losing the invested capital.
IT IS INCREDIBLY NECESSARY FOR CCI TO INCREASE DIVIDENDS - if they don't the price of the stock will stagnate, at best, and at worst, trickle down until the yield becomes competitive.
Fast forward to today. Do you believe that CCI will continue to increase its dividend? What are the chances that CCI will need to cut its dividend to fund its debt? Right now its cutting all the cost it can such that its robbing PETER to pay the shareholders. Once there are no more costs to cut, the only option is to cut the dividend. This will DRIVE THE STOCK PRICE DOWN.
This year, the debt of CCI was 21 BILLION as of June 2023 and the debt to equity ratio is 365%!!! A good debt to equity is 100%, CCI has exceeded that significantly. The further CCI stock falls the harder it will be to get debt at low rates and will cause the cost to service the debt to continue to increase until the company is no longer able to continue to operate. Naturally, this is a death spiral for a company.
Hope you all enjoyed my tale. Leadership drove this one into the ground hard.