Looking for stock trading ideas? Join 6000+ traders in the #1 community for stock traders/investors. Click Here to See if you Qualify.
The marijuana industry is getting a lot of attention from investors of all ages and trading styles because cannabis is moving forward in a major way, and the industry, as a whole, is experiencing a pretty good time. Despite such tremendous growth prospects, the major disadvantage with this industry is it suffers from high market volatility which makes the investors are susceptible to high losses. However, there are still some excellent stocks engaged in the business that consistently generate high revenues and earnings for investors.
Innovative Industrial Properties (IIPR) is one such stock. Rather than growing marijuana itself, this US-based REIT leases its portfolio to licensed medical marijuana growers. IIPR has a history of high growth and has gained more than 1,100% in the past five years. So, people who want to invest in stocks that can help them grow their money faster can consider this real estate play.
Is Innovative Industrial Properties Stock In The Cannabis Space A Good Stock?
The Marijuana Industry is Growing
The marijuana industry has very bright prospects. It is a relatively new industry and is growing rapidly. As more states and countries are legalizing pot for both medical as well as recreational purposes, the number of growers, retailers, and ancillary providers has also popped up right and left. It was found in 2020, that the legal cannabis sales in the US alone has shot up by almost 50% and if the same growth trend continues by 2028 the global legal marijuana market might reach a massive valuation of $71 billion.
The best aspect of IIPR is that it owns several facilities in which marijuana is being grown, processed, and then sold. In some cases, it also buys property from cannabis producers to provide them with the necessary capital and then profits again by leasing those properties back to the former owners
The change in people’s perception regarding pot and the newer state laws have proven to be a boon for this company’s bottom line. Initially, when the REIT had first gone public there were only 8 states in the US that had legalized recreational marijuana and now with each passing day, things are looking much better for this REIT as its opportunities are expanding more and more.
Also, at present medical marijuana is legal in almost 40% of the US states and according to a recent Pew Research Center poll, medical marijuana has got near-universal acceptance in America with 91% approval thereby furthering the TAM for the company. Moreover, considering the fact that the said REIT has its properties scattered across the best state markets for the drug, and that it is only one of the few REITs in this space, it would also get the first-mover advantage as the market keeps expanding.
A Strong Performer
As the marijuana market is growing massively across the globe, IIPR is also rapidly expanding its portfolio of properties that are being leased out to licensed marijuana growers. At present, the REIT has already acquired 75 properties in 19 states, and that too just within a span of 5 years.
The REIT’s list of clients includes big names such as Green Thumb Industries, Trulive, Cresco Labs, Jushi Holdings, etc is also increasing with each passing day and that progress is consequently getting reflected in its financial reports. As this year the REIT reported a 103% increase in its revenues in the first quarter of this year followed by a further 101% increase in the second quarter. Similarly, its net income had also jumped by 122% and 124% in these two quarters. Also, its adjusted fund from operations that had increased by 116% and 104% in the last two quarters respectively gives a more accurate assessment of its incredible earnings.
Besides that, the company’s acquisition spree is still intact even after making multiple top-notch acquisitions since the month of July. The company had announced that since the beginning of the third quarter it has already made four acquisitions that include three new properties and an additional land expansion at an existing property — for its properties in Illinois, Maryland, Missouri, and New York.
Investments are made with the sole intention of wealth creation. So, in today’s volatile market most investors prefer to invest in such growth stocks that will not only provide them with the necessary capital appreciation but will also provide regular dividend payouts.
IIPR has a strong record of providing handsome returns to its investors. As a REIT, the company is compulsorily required to return 90% of taxable income to investors in the form of lucrative dividends. For this reason, most investors view it as a dividend king that not only provides impressive capital appreciations over the years but also rewards them with regular handsome dividends.
Though at first glance the REIT’s dividend yield of 2.53% may seem unimpressive, if compared to that of the 1.3% returned by the S&P 500 one can see the REIT’s dividend yield is almost double. Also, one should remember the REIT’s last quarterly dividend payout of $1.5 was almost ten times higher than its first in 2017. Further, if one adds up all the dividend payouts made by the company over the past years it can be seen that it has already returned 2/3rd of the IPO price just in the form of dividends itself.
IIPR is the kind of stock that can supercharge an investor’s portfolio in the long run. As per the New Frontier Data, cannabis market on a global level is going to double by 2025 and would reach the $51 billion mark soon. So, looking at the current trends in the marijuana market it is not hard to comprehend that this REIT will be able to successfully maintain the same torrid levels of growth in the coming years as well. Therefore, investors who are looking for a solid dividend stock that would reward them with impressive returns as the market unfolds further can surely consider investing in this amazing REIT.