This Marijuana Stock Is One of the Strongest, Even in a Market Correction

NYSE-IIPR - Pot Stock Is One of the Strongest, Even During a Market Correction
iStock.com/Светлана Зайцева

IIPR Stock Prediction

The marijuana industry has been undergoing a tough time lately. But even amidst the chaos, one company continues to perform well: Innovative Industrial Properties Inc (NYSE:IIPR).

Innovative Industrial Properties is a real estate investment trust (REIT), not a traditional marijuana company by any means. Still, it’s a company operating within the marijuana space, and it’s poised to see big gains in the future.

The reason is simple: during a gold rush, sell shovels. During a marijuana rush, sell (or rent out) land.

By leasing land to marijuana producers, Innovative Industrial Properties is able to take advantage of the nascent legal pot industry while largely being immune to the volatility that plagues other parts of the sector.

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That combination is a potent one, and it makes IIPR stock both able to rise at a rapid pace and power through marijuana stock market corrections better than most.

Just look at the stock’s performance over the summer, months that have seen many other pot stocks plummet.

Innovative Industrial Properties stock—represented by the black line in the below price chart—has vastly outperformed several of the top pot stocks in the marijuana industry, with none of them being able to break even, let alone show gains, over the past three months. Meanwhile, IIPR stock is up a healthy 22%.

Chart courtesy of StockCharts.com

On top of those gains, IIPR investors also get a dividend. Being a REIT, the company is mandated to hand out at least 90% of its taxable income to shareholders.

The beauty of this arrangement is how unique it is in the pot sector: dividends are typically a tool that blue-chip companies that have seen their best growth days behind them use to encourage investment.

The best part about Innovative Industrial Properties stock is that it’s still rising at a speedy rate. Its upward journey has only begun, and the dividend is a nice cherry on top.

My IIPR stock prediction has it easily gaining another 50% in a year’s time, provided we don’t encounter a massive recession. All things being normal, this marijuana stock is poised for big gains for a long while yet.

Innovative Industrial Properties Financial Report

Innovative Industrial Properties Inc is looking pretty when it comes to its financials. The company’s most recent quarterly report was largely positive.

The REIT reported rental revenues of about $8.3 million in the quarter, up 155% from the same quarter a year prior. (Source: “Innovative Industrial Properties Reports Second Quarter 2019 Results,” Innovative Industrial Properties Inc, August 7, 2019.)

Net income available to common stockholders increased to $3.1 million ($0.30 per diluted share). The company also reported adjusted funds from operations (AFFO) of approximately $5.8 million ($0.59 per diluted share), a 176% increase from a year ago.

That healthy dividend I was harping on above jumped to $0.60 per share, a 33% jump from the last quarter and a 140% jump from last year.

The company continues to make acquisitions across the country, with new properties in California, Ohio, and Pennsylvania, to name a few.

Overall, this was a very strong quarter for Innovative Industrial Properties. It showed a company that has made major progress and still has a lot of room to grow.

With the company’s reach expanding across the U.S., and federal marijuana legalization closer to becoming reality, Innovative Industrial Properties is perfectly situated to profit.

Analyst Take

The market correction is hitting pot stocks hard, but not all marijuana stocks are created equal.

Innovative Industrial Properties stock gives investors a chance to gain exposure to a fast-growing industry while avoiding many of the pitfalls that usually accompany emergent-industry stocks, namely volatility.