This Pot Inventory (and Its Dividends) Might Double Your Cash

Innovative industrial real estate ((NYSE: IIPR), a Real Estate Investment Trust (REIT), offers an unconventional way to invest in the marijuana industry. It buys real estate and then rents it to medical cannabis companies in the United States. This stock is of particular interest to investors who want to be part of the marijuana boom but may be hesitant about the IlLegal status of the drug in the USA

The fact that Innovative Industrial is only indirectly linked to the marijuana sector has its advantages. The stock is relatively safe from the volatility of the sector, and the drug’s illegal status does not affect the company’s ability to raise capital. Innovative is financially very strong and has increased its turnover rapidly. The latest fourth quarter results were evidence of this. In the past 12 months, Innovative’s stock is up 141%, outperforming the industry benchmark Horizons Marijuana Life Sciences ETFProfit of 105%.

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Acquisitions drive sales

Real estate acquisitions and leasing are the only factors contributing to Innovative’s revenue growth. The company regularly earns its income through rental income. The fact that marijuana is illegal nationwide makes it difficult for pot companies to acquire land and capital for their manufacturing facilities. Therefore, Innovate Industrial fulfills a large (and growing) need.

In its fourth quarter, which ended December 31, 2020, revenue increased 110% year over year to $ 37.1 million. For full year 2020, total revenue was $ 117 million, up 162% year over year thanks to additional acquisitions and new property rentals in 2020. Innovative’s net income increased from $ 9.5 million for the year $ 21 million. before period.

Despite a difficult 2020 for many sectors, the cannabis industry continued to expand – which resulted in Innovative Industrial letting more properties. At the end of the fourth quarter of 2020, Innovative held 67 properties in 17 states for a total of 5.8 million square feet. In 2020 alone, the company acquired 20 new properties. The company announced in its earnings announcement that it had acquired five properties with total lettable space of 848,000 square feet in California, Florida, Massachusetts and Washington between October 1, 2020 and February 24, 2021.

The medical cannabis boom keeps this company going

The global medical cannabis market is projected to grow at a compound annual growth rate (CAGR) of 23% and is valued at $ 44.4 billion by 2025. The importance of medicinal cannabis is becoming increasingly well known. Research has shown that medicinal cannabis helps with various health problems such as anxiety, depression, and chronic pain.

These benefits are only part of what has been so far Driving growth in cannabis use in the U.S. In all 50 states, sales of legal cannabis rose 46% last year from 2019 to $ 17.5 billion. The management of Innovative Industrial has expressed enthusiasm for the increasing legalization of the state. Paul Smithers, CEO of Innovative, believes six more states, Texas, South Carolina, Alabama, Kentucky, Kansas and Nebraska could potentially move ahead with their medical cannabis legalization programs this year.

Innovative Industrial tenants include popular U.S. cannabis companies Curaleaf Holdings ((OTC: CURLF), Green Thumb Industries ((OTC: GTBIF), Cresco Labs ((OTC: CRLBF), and Trulieve cannabis ((OTC: TCNNF) All of them performed excellently in their final fourth quarter, which ended on December 31, 2020. Cresco Labs posted a year-over-year revenue increase of 292% to $ 162.3 million. Curaleaf’s total sales increased 205% to $ 230 million. Green Thumb Industries was up 134% year over year to $ 177.2 million, while Trulieve Cannabis total sales rose 111% to $ 168.4 million. As more states legalize cannabis (medical and / or recreational), these companies will accelerate their expansion plans, giving innovators more leasing opportunities.

The icing on the cake: a dividend

REITs are required by law to pay out at least 90% of their taxable income to investors in the form of dividends. In addition to indirect access to the marijuana industry Innovative also offers its investors a nice dividend payment. It has a dividend yield of around 2.7%, much higher than that S&P 500average dividend yield of 1.8%. However, a high dividend yield is not enough – the decisive factor is how consistently the company pays dividends.

Adjusted Funds from Operations (AFFO), a useful metric for REITs that is similar to the earnings of other companies, is often rated by how much cash is available for distribution as dividends. Innovative’s stellar sales and net income enabled the AFFO to grow a whopping 191% year over year to $ 98 million for 2020 as a whole. AFFO was $ 32.4 million in the fourth quarter compared to $ 14.2 million in the fourth quarter of 2019. This allowed the company to get more back to investors. It recently announced its dividend for the first quarter of 2021 of $ 1.24 per share. This is an impressive 6% sequential increase and a 32% increase from the first quarter 2020 dividend. This was the ninth dividend increase for the company since going public in 2016.

Dividend stocks make for a stable income. If you are an investor looking to enjoy the benefits of a developing marijuana industry along with a steady income, this REIT offers both benefits. Growing revenue from a developing medical marijuana industry, constant profits, constant dividends, and sensible growth strategies make up this Pot broth an excellent candidate for your portfolio.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.