IIPR Stock Up 800%: Does It Still Have Upside with U.S. Legalization So Close?

IIPR stockInnovative Industrial Properties Stock: Is It the Best?

Marijuana stocks have had a roaring start to 2021. And that makes sense; there was no way the cannabis industry wasn’t going to bounce back. After all, there’s still so much potential left within pot stocks.

Now, with U.S. marijuana legalization closer than ever, I believe that one marijuana stock stands above the rest: Innovative Industrial Properties Inc (NYSE:IIPR). IIPR stock, in my mind, could be the best way for investors to profit from U.S. pot legalization.

To any of my long-time readers, this won’t exactly come as a surprise. I’ve been writing about Innovative Industrial Properties stock for years now, pretty much since I first became aware of the stock.

Chart courtesy of StockCharts.com

And, as you can see in the above chart, my enthusiasm for Innovative Industrial Properties Inc has been more than validated.

So what makes IIPR stock so valuable?

Easy: the company has been capitalizing on the marijuana market without producing marijuana. Innovative Industrial Properties is a marijuana real estate investment trust (REIT). Essentially, the company buys land and leases it to pot producers.

That has allowed Innovative Industrial Properties stock to remain on the New York Stock Exchange for years now, without having to face the difficulties that many U.S. marijuana stocks have run into.

In fact, there are virtually zero pure-play U.S. pot stocks listed on a major stock exchange in the U.S. That in and of itself has opened huge avenues of growth for IIPR stock, as the company offers investors a way to benefit from the U.S. marijuana market without having to worry about restrictions. Like, say, large banks being unable to lend money to many U.S. pot-related businesses due to the federal prohibition of the drug.

What’s more, Innovative Industrial Properties stock pays out a healthy dividend. As a REIT, it’s mandated to distribute 90% of its taxable earnings to its shareholders in the form of dividends.

While that may not be as juicy as it sounds (a REIT could technically have no taxable income if it’s posting losses, even if its revenue is sky-high), it’s still an enticing prospect for investors.

Innovative Industrial Properties Inc’s dividend has been increasing for years, as the following chart shows:

Ex-Dividend Record Declared Payable Amount Type
12/30/20 12/31/20 12/14/20 01/15/21 $1.24 Cash, quarterly
09/29/20 09/30/20 09/15/20 10/15/20 $1.17 Cash, quarterly
06/29/20 06/30/20 06/15/20 07/15/20 $1.06 Cash, quarterly
03/30/20 03/31/20 03/13/20 04/15/20 $1.00 Cash, quarterly
12/30/19 12/31/19 12/10/19 01/15/20 $1.00 Cash, quarterly
09/27/19 09/30/19 09/13/19 10/15/19 $0.78 Cash, quarterly

(Source: “Dividend History,” Innovative Industrial Properties, last accessed February 9, 2021.)

Right now, the dividend amounts to about five percent, relative to the share value. In other words, for every dollar invested in Innovative Industrial Properties Inc, a shareholder can anticipate getting $0.05 back as a dividend per quarter.

That’s not bad. What’s more, REITs are considered to be more stable investments due to their ties to real estate. But with IIPR stock, you get a marijuana REIT: that means huge potential for growth and stability.

To be fair, Innovative Industrial Properties stock is more volatile than most REITs, but that’s to be expected, considering the company operates in the pot market. So, while it may not be as safe as other real estate investments, it’s still on the safer side, relative to other pot stocks.

IIPR Stock Quarterly Report & Future

In November 2020, Innovative Industrial Properties reported total revenues of approximately $34.3 million for Q3 2020, representing a 197% increase from the prior year’s third quarter. (Source: “Innovative Industrial Properties Reports Third Quarter 2020 Results,” Innovative Industrial Properties Inc, November 4, 2020.)

The company posted net income available to common stockholders of approximately $18.9 million, or $0.86 per diluted share.

The company also issued more shares to keep up with growing demand.

Since then, Innovative Industrial Properties has been busy acquiring land across the country in order to capitalize on the growing push for federal U.S. marijuana legalization.

The company recently bought and leased out property in Florida, another addition to its growing portfolio of real estate across the country. (Source: “Innovative Industrial Properties Acquires Property in Florida and Enters Into Long-Term Lease with Harvest,” Innovative Industrial Properties Inc, January 25, 2021.)

So the company continues to expand while posting large percentages of revenue growth. That’s very good news for investors.

But there’s a catch: Innovative Industrial Properties stock is at risk of overheating.

IIPR stock is rising exponentially year after year. And while that growth is impressive and, I believe, justified (especially considering just how close we are to federal U.S. pot legalization), there’s a chance that Innovative Industrial Properties Inc could be overvalued right now due to the hype.

While I don’t believe that, based on the company’s continued expansion across the U.S. while more and more states legalize pot, there’s still the risk of a correction.

In fact, I’d label Innovative Industrial Properties stock volatile right now, precisely due to the risk. While I believe the stock still has a lot of room to rise, there’s a decent chance it may tumble first.

But even if IIPR stock were to fall, I believe that, in the long term, it will come back stronger than ever.

Refer back to the above chart. There were times when the share price collapsed, but I continued to be bullish about Innovative Industrial Properties stock.

Why? Because I believed in the company’s business model and knew that the market was set for growth. That proved to be the correct approach, as evidenced by the near-800% gains over the past three years.

Analyst Take

Innovative Industrial Properties Inc is a volatile but enticing stock right now. Yes, IIPR stock is at an all-time high, but the overall pot market is also receiving all-time-high buzz.

With U.S. marijuana legalization gaining steam, there’s a good chance we could see federal legalization within the next year or so (maybe even within a few months). If that happens, Innovative Industrial Properties stock will likely be a major beneficiary of that news.