Innovative Industrial Properties Inc: Pot Stock Outshines Apple, …

IIPR Stock Is Set to Keep Rewarding Investors in 2022

The S&P 500 might be on fire, but you can’t exactly say the marijuana industry is smoking right now. For the most part, pot stocks took a beating in 2021. Some might even call it a bloodbath.

In February 2021, marijuana stocks were flying high as optimistic investors sent them to their highest levels since recreational cannabis became legal in Canada in October 2018. The growth trajectory was tough to build on, with marijuana companies hit by disappointing sales, ongoing losses, and regulatory issues.

Since mid-February 2021, the AdvisorShare Pure US Cannabis ETF (NYSE:MSOS) has lost 56% of its value. Over the same time frame, the S&P 500 has advanced approximately 22%.

Not all pot stocks took a beating in 2021, though. One of the best-performing marijuana stocks has been Innovative Industrial Properties Inc (NYSE:IIPR). Profit Confidential has been following Innovative Industrial Properties stock for years.

As of this writing, IIPR stock is up by:

• 13% over the last three months
• 35% over the last six months
• 40% year-to-date
• 47% year-over-year

Chart courtesy of StockCharts.com

Of course, everything is relative. There’s no sense touting a stock and saying it’s great when it’s trailing its peers or the broader market.

That isn’t the case with IIPR stock, though.

Not only was Innovative Industrial Properties stock one of the best-performing pot stocks in 2021, but it also outperformed flashy tech stocks like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc (NASDAQ: AAPL), Meta Platforms Inc (NASDAQ:FB), and Netflix Inc (NASDAQ:NFLX).

Year-to-date, Amazon stock has rallied by 3.7%, Apple stock has advanced 36%, Meta Platforms stock has climbed by 25%, and Netflix stock has gone up by 13%.

Chart courtesy of StockCharts.com

Not only did IIPR stock outpace the aforementioned popular tech stocks in terms of price appreciation in 2021, but it also provides much frothier dividends than them. It has a current yield of 2.3%.

Apple Inc’s dividend yield is just 0.5%. Meanwhile, Amazon.com, Inc., Meta Platforms Inc, and Netflix Inc don’t provide any dividends.

Innovative Industrial Properties Stock’s Dividend Rises Again

In addition to providing investors with market-trouncing capital appreciation, as a real estate investment trust (REIT), Innovative Industrial Properties Inc is legally obligated to return virtually all of its earnings to investors as dividends.

In mid-December 2021, the REIT declared a fourth-quarter dividend of $1.50 per share. (Source: “Innovative Industrial Properties Declares Fourth Quarter 2021 Dividends,” Innovative Industrial Properties Inc, December 15, 2021.)

This represents a 28% increase over the $1.17 per share paid out in the third quarter of 2020.

Moreover, it’s the 12th dividend increase since IIPR stock’s IPO in December 2016. Over that period, Innovative Industrial Properties stock’s quarterly dividend has increased by 900%, from $0.15 to $1.50. (Source: “Dividend History,” Innovative Industrial Properties Inc, last accessed December 30, 2021.)

About Innovative Industrial Properties Inc

Innovative Industrial Properties stock is a great stock for investors who want to take advantage of the cannabis industry but aren’t all that keen on actually investing in marijuana. (Source: “Our Business,” Innovative Industrial Properties Inc, last accessed December 30, 2021.

Because marijuana is still illegal in the U.S. at the federal level, it’s difficult for recreational and medical cannabis companies to find capital. That’s where Innovative Industrial Properties comes in.

Innovative Industrial Properties Inc purchases land from experienced, licensed medical cannabis operators and leases the land back to them. That provides the marijuana companies with capital to develop their operations.

The REIT targets well-funded medical cannabis companies in the $5.0-million to $30.0-million range and signs them up for long-term leases of 10 to 20 years.

Innovative Industrial Properties Inc hikes its rents by three percent to 4.5% per year, providing it with an excellent revenue stream.

At the start of 2020, the REIT’s portfolio consisted of 47 properties. As of this writing, the portfolio stands at 103 properties in 19 states. (Source: “Innovative Industrial Properties Acquires 100% Leased Portfolio of 27 Properties in Colorado, Pennsylvania and North Dakota,” Innovative Industrial Properties Inc, December 14, 2021.)

Together, these properties represent 7.7 million rentable square feet. They’re 100% leased, with a weighted-average remaining lease term of approximately 16.6 years. 

Three of Innovative Industrial Properties Inc’s top tenants are Cresco Labs Inc (CNSX:CL, OTCMKTS:CRLBF), Green Thumb Industries Inc (CNSX:GTII, OTCMKTS: GTBIF), and Trulieve Cannabis Corp (CNSX:TRUL, OTCMKTS:TCNNF).

Acquisition of 27 100%-Leased Properties

On December 14, 2021, Innovative Industrial Properties Inc announced that it had closed on the acquisition of 27 properties in Colorado (24 properties), North Dakota (two properties), and Pennsylvania (one property). (Source: Ibid.)

Innovative Industrial Properties Inc’s properties are 100% leased for use as regulated cannabis dispensing, processing, and/or cultivation. The total cost of the portfolio was approximately $27.7 million.

Of those properties, 16 are leased to a subsidiary of Columbia Care Inc (CNSX:CCHW, OTCMKTS: CCHWF), four are leased to subsidiaries of Medicine Man Technologies Inc (OTCMKTS:SHWZ), three are leased to subsidiaries of Curaleaf Holdings, Inc. (CNSX:CURA, OTCMKTS:CURLF), three are leased to subsidiaries of LivWell Holdings, Inc., and one is leased to a subsidiary of Southwest Alternative Care, LLC (which operates as Kaya Cannabis).

Another Great Quarter

For the third quarter ended September 30, 2021, Innovative Industrial Properties announced that its revenue jumped by 57% year-over-year to $53.9 million. (Source: “Innovative Industrial Properties Reports Third Quarter 2021 Results,” Innovative Industrial Properties Inc, November 3, 2021.)

The REIT reported net income of $29.8 million, or $1.20 per share, a 57% increase over the third-quarter 2020 net income of $18.8 million, or $0.86 per share.

Innovative Industrial Properties Inc’s funds from operations (FFO) were $42.5 million, or $1.62 per share, a 60% improvement over the third-quarter 2020 FFO of $27.8 million, or $1.22 per share. Its adjusted FFO advanced 61.5% year-over-year to $45.0 million, or $1.71 per share.

Innovative Industrial Properties Inc ended the third quarter of 2021 with $127.3 million in cash and cash equivalents, as well as approximately $554.4 million in short-term investments, for a total of $681.7 million.

Analyst Take

Is there a reason not to be bullish on Innovative Industrial Properties Inc?

The company reports consistently strong financial results and is constantly expanding its real estate empire. That helps it provide IIPR stock investors with capital appreciation and reliable, growing dividends.