Investment IdeasStocksUSCannabis REIT Innovative Industrial Properties Offers Investors Higher Dividends

The San Diego-based company currently owns 22 properties in 11 U.S. states and now offers investors a dividend of 60 cents per share.
David Jagielski David JagielskiJuly 2, 20195 min

Investment continues to pour into the rapidly growing cannabis industry, and it doesn’t always have to involve owning shares of cannabis growers. Instead, investors can strategically buy shares in companies that are associated with the industry and are benefiting as a result.

A good example is a real estate investment trust (REIT), which helps fund expansion for the industry by buying growing facilities from marijuana growers who then rent the property back under long-term leases.

Unique opportunity for cannabis investors

One cannabis REIT stock attracting investors is Innovative Industrial Properties, Inc. (NYSE:IIPR). The San Diego-based company currently owns 22 properties in 11 U.S. states, up from around a dozen it owned at the end of 2018.

Over the past year, Innovative Industrial’s share price rose nearly 240 per cent and the stock is up more than 500 per cent since its late 2017 IPO. Although the company has just $19 million in sales over the past four quarters, it also has profits of $8 million during that time.

Since Innovative doesn’t have to concern itself with legal issues or about growing cannabis and commodity prices, it can provide stability and long-term growth opportunities for investors. Through acquiring more properties, rising values and higher lease rates, there are multiple ways that the company’s value can rise over time.

Dividend income a rarity

One particularly attractive feature of buying Innovative stock for cannabis investors: it pays a dividend.

A dividend is not something you expect investing in companies producing cannabis. Marijuana firms have been raising cash to fund growth in the expanding industry, and so paying a dividend would make little sense under these circumstances.

But Innovative Industrial announced last month it will pay its shareholders a second-quarter dividend of 60 cents per share, which is a 33 per cent increase over the dividend it offered last quarter. (Stockholders can cash in their dividends on July 15 if they held shares June 28 or earlier.)

While that equates to a modest yield of around two per cent, the REIT cannabis company has been increasing its dividend payments every quarter since 2017 when it paid 15 cents per share. Although investors shouldn’t expect the dividend to triple every couple of years, it’s clear that Innovative Industrial is making an effort to make its stock a formidable dividend option for non-cannabis investors.

Innovative Industrial touts itself as the first and only real estate company on the New York Stock Exchange that is focused on the regulated U.S. cannabis industry. For now, the stock is still a way for those interested in the cannabis industry to get involved in a lower risk play that offers investors a unique investment option.

But the downside is like most stocks associated with the cannabis industry, it’s trading at a heavy premium. New investors will have to pay over 125 times the company’s earnings and 65 times its sales to own a piece of Innovative Industrial.

*All figures USD

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