Safer Marijuana Stocks Play: The Marijuana REIT That Could Double in 2019

Safer Marijuana Stocks Play: The Marijuana REIT That Could Double in 2019
iStock.com/Yana Tatevosian

Marijuana REIT

While we often focus on marijuana producers on Profit Confidential, investors who ignore the adjacent industries cropping up around pot do so at their own peril. Marijuana real estate investment trusts (REITs) are a great example of prime pot stocks that never touch cannabis. One marijuana REIT in particular, Innovative Industrial Properties Inc (NYSE:IIPR), has me very excited for where it can go in the future.

IIPR stock, in my view, has the potential to double in 2019. Before we get to my reasoning, however, let’s nail down what a marijuana REIT is.

As mentioned above, “REIT” stands for real estate investment trust. Essentially, a REIT is a company that owns and usually operates income-producing property.

In the case of Innovative Industrial Properties, it buys land and leases it back to cannabis producers, freeing up capital for pot cultivators while generating income for itself.

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IIPR Stock and Marijuana Dividend

As a REIT, Innovative Industrial Properties Inc must distribute at least 90% of its taxable income to its stockholders through a dividend, making it one of the very few companies in this industry that pays a dividend.

This means that you get both impressive growth and the steady payout of a dividend, a combination that few companies can hope to match. In fact, this is one of the only ways to get a marijuana dividend.

Innovative Industrial Properties is also expanding across the U.S., being one of the few publicly traded companies on the New York Stock Exchange that is tied to the booming pot industry.

Medical marijuana has been legalized in 33 states and the District of Columbia (D.C.) so far. With operations in 10 states, the company has plenty of room to expand to the other 23 states and D.C. moving forward.

With gains exceeding 160% over the past year, there’s a lot of promise wrapped up in IIPR stock.

As you can see in the chart below, year-to-date, Innovative Industrial Properties stock has performed very well.

Chart courtesy of StockCharts.com

In comparison with Canopy Growth Corp (NYSE:CGC), Innovative Industrial Properties Inc has kept apace while also growing at a more stable, sustainable rate. That is due to the fact that there are fewer variables that can impact IIPR stock, whereas the volatile pot stock market is still very much a boom-and-bust industry.

IIPR Financial Report

The financials for Innovative Industrial Properties came in strong for the most recent quarterly report.

Total revenue hit $3.9 million in the third quarter, a jump of more than 150% year-over-year. (Source: “Innovative Industrial Properties Reports Third Quarter 2018 Results,” Innovative Industrial Properties Inc, November 7, 2018.)

The company also hit a net income attributable to common stockholders of about $1.5 million, or $0.21 per diluted share.

Dividends also increased to $0.35 per share, up from $0.25 the previous quarter. This dividend payout will remain flat heading into the next quarter.

The financials were bolstered by strong acquisitions, including a 55,000-square-foot cannabis cultivation and processing facility in a sale-leaseback transaction in Massachusetts, valued at almost $12.8 million (excluding transaction costs).

The company made similar expansions in Michigan and Colorado.

Analyst Take

This brief overview shows why investors should be paying attention to the whole legal cannabis industry and should not be overly focused on marijuana producers.

There is an entire ancillary economy growing around cannabis. Those paying attention are going to be able to see huge gains, not only from pure-play pot stocks, but also from stocks that grow in tandem with them.

IIPR stock is a prime example of a fantastic stock of a marijuana company that never even touches a plant.