IIPR Stock: Is Innovative Industrial Properties Inc Done Growing?

IIPR Stock Surges Upward—But Is There Room Left to Grow?

For years now, I’ve been locked in on the seemingly boundless opportunities in the U.S. marijuana market. But there is one security I’m particularly keen on: Innovative Industrial Properties Inc (NYSE:IIPR) stock.

IIPR stock has had enormous potential and has made many of my readers very happy over the years. But having said that, with IIPR stock soaring so high, is there still room for the company to grow?

I’ve had a strong run predicting growth with Innovative Industrial Properties Inc, and I feel that the company has yet to reach its limit. In fact, it may still be undervalued.

In the three years I’ve written about IIPR stock, it’s gone up over 660%. It has by far been my most consistent and strongest performer.

Chart courtesy of StockCharts.com

With that massive growth in such a short time, coupled with a slowdown in U.S. legalization efforts and a general fall in share prices across the marijuana market, it makes sense that some would believe IIPR stock to be overvalued. Or at least, past its prime.

But that’s where they’ve got it all wrong.

You see, while many U.S. pot stocks are reliant on the future potential locked away in the richest market on earth, IIPR stock has far fewer limits to expand.

That’s because Innovative Industrial Properties Inc is a marijuana REIT (real estate investment trust). That means that while the company’s stock is tied to marijuana, they don’t actually grow cannabis themselves. Instead, Innovative Industrial Properties leases out land for other companies to produce marijuana from.

That, in turn, has allowed them to sidestep many of the obstacles that U.S. marijuana stocks face. Notice that IIPR stock is already listed on the New York Stock Exchange while many U.S. marijuana stocks can’t list on the major U.S. exchanges.

Being on a major U.S. exchange opens up the company to a huge inflow of capital from investors at the retail level (who are skittish about over-the-counter securities) and institutional investors (who don’t have to worry about government crackdowns). And this is because Industrial Properties Inc doesn’t actually produce any marijuana at all.

That fact alone gives IIPR stock the leeway to grow as marijuana legalization passes state by state at a gradual pace, while we await a move by the federal government.

What’s more, IIPR stock can benefit from both medical and recreational marijuana legalization in the U.S. This allows them the ability to be in all 50 states before many other pot stocks.

In other words, the growth potential behind IIPR stock is much better compared to almost any other U.S. pot stock. This positions the company to continue to see massive growth despite having soared over 600% in recent years.

Furthermore, as a REIT, it is mandated to pay out a healthy dividend to investors. That’s because a REIT must distribute 90% of its taxable earnings to its shareholders in the form of dividends.

Now, don’t get misled by that number. A REIT could theoretically have no taxable income if it’s posting losses, even if revenue continues to surge quarter after quarter.

Regardless, it’s nice to have that dependable income coming in every quarter.

Common Stock Dividends

(Source: “Dividend History,” Innovative Industrial Properties Inc, August 8, 2021.)

And better yet, the dividend payout gets larger and larger every quarter. That’s because when you see huge growth, you can expect revenue has soared in tandem.

In the second quarter of 2021, the company saw revenue of $48.9 million. This represents an increase of over 100% compared to the year before. (Source: “Innovative Industrial Properties Reports Second Quarter 2021 Results,” Innovative Industrial Properties Inc, August 4, 2021.)

The dividend went to $1.40, up from last year by about 32%.

Since April, the company has also expanded in several states, including Pennsylvania, Michigan, Massachusetts, Florida, and Illinois.

And remember that all this growth is taking place during the pandemic, making it all the more impressive. In fact, over the past 12 months, Innovative Industrial Properties more than doubled its value due to these impressive numbers and growth.

Chart courtesy of StockCharts.com

And again, this is during the pandemic when there was a global economic slowdown.

This company has proven itself to be pandemic-proof. That’s a rare quality for a marijuana stock, making it a solid addition to the portfolio. It means you can better withstand times of uncertainty while still gaining exposure to the massive growth potential in the marijuana market.

I believe that IIPR stock is no longer just a top marijuana stock for all the above reasons. In my opinion, it is the ultimate marijuana stock.

The company’s ability to make gains as the country slowly rolls out legalization state by state makes it uniquely suited to benefit from the situation.

In fact, the slow rollout is actually better for IIPR stock. It allows the company to make its gains incrementally and over a longer period, rather than in one big hype-fueled surge that would come about during federal legalization.

IIPR stock looks able to gain as it continues to expand in 2021—and for years to come.

Analyst Take

It makes sense for pot stock investors to look twice at IIPR stock and wonder if it can indeed continue to grow.

Much of the U.S. still has yet to legalize marijuana. However, with Innovative Industrial Properties Inc’s ability to expand into these states (not to mention that each state needs its own growing capabilities due to restrictions on marijuana transport), you have a situation that seems almost designed to benefit IIPR stock for a long time yet.