- Activist investor Corvex Management has disclosed a $1B (nearly 4%) stake in Crown Castle (NYSE:CCI), and is calling on the tower owner to either start paying over $4/share in quarterly dividends next year (Option #1), or over $1.60/share in dividends combined with ongoing buybacks (Option #2).
- The first option would require a steep 80%+ payout ratio, but maintain CCI's net debt/EBITDA ratio around 4.5x (potentially ~6x with M&A). The second would involve only a 30% payout ratio, but boost net debt/EBITDA to ~7x (~7.5x with M&A).
- Corvex argues "changing Crown Castle's capital allocation strategy would enable the company to attract a new class of yield-oriented investors," and that the company's plan to delay a full payout structure until the expiration of net operating losses in 2018-2020 is inadequate.
- As for speculation Crown Castle could bid for Verizon's tower portfolio, Corvex thinks CCI should change its capital allocation plan before making any offer. "We do not believe that the company should complete a Verizon transaction by increasing leverage and then de-levering again with no material change to its payout ratio."
- CCI's dividend yield is currently at 1.7%. The company reiterates it will discuss its capital allocation plans during its Oct. 20 Q3 CC.