IIPR Stock: No Sell-Off with This Cannabis Play, up 225% Since March

Innovative Industrial Properties Inc Marches to New Highs

Innovative Industrial Properties Inc (NYSE:IIPR) is arguably the best cannabis play in the U.S. Maybe even in all of North America. At a time when most pot stocks seem to have stalled, Innovative Industrial Properties stock continues to notch up to new highs.

In Canada, the Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ), which invests in medical and recreational cannabis stocks, is down 45% year-over-year and down 25% year-to-date. On the plus side, it’s up 36% since hitting March lows.

In the U.S., the ETFMG Alternative Harvest ETF (NYSE:MJ), which is the largest cannabis ETF on the planet, is down 46% year-over-year and 57% year-to-date. On the other hand, it’s up 24% since March.

All of that pales in comparison to what IIPR stock has been doing. Shares in the cannabis real estate investment trust (REIT) have climbed 37% year-over-year, have gone up approximately 66% in 2020, and have soared 225% since March.

Those gains are all justified, too. It’s not a case of a rising tide lifting all boats. IIPR’s share price is being juiced by strong financial results and its big dividend, which it has raised seven times since going public in late 2016. The company’s dividend currently stands at 4.25%, or $4.24 per share.

Chart courtesy of StockCharts.com

IIPR Stock Overview

Innovative Industrial Properties Inc is the first and only publicly traded company on the New York Stock Exchange to provide real estate capital to the medical-use cannabis industry. (Source: “Our Business,” Innovative Industrial Partners Inc, last accessed September 30, 2020.)

The company buys land from cash-starved medical-use cannabis operators and leases the land back to them. This provides a steady revenue stream to IIPR and provides marijuana producers with capital to further develop their own businesses.

IIPR is careful about who it gives money to. The company only targets well-funded medical-cannabis companies in the $5.0 million to $30.0 million range and signs them up to long-term leases of 10 years to 20 years.

The San Diego, CA-based company increases annual rent by three percent to 4.5%.

IIPR’s property portfolio currently consists of 63 properties located in Arizona, California, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, North Dakota, Ohio, Pennsylvania, and Virginia.

These properties cover 4.9 million rentable square feet, which are 99.3% leased, with a weighted-average remaining lease term of 16.1 years.

Some of IIPR’s top tenants include Cresco Labs (OTCBB:CRLBF, CNSX:CL), Trulieve Cannabis Corp (OTCBB:TCNNF, CNSX:TRUL),  and Green Thumb Industries (OTCBB:GTBIF, CNSZ:GTII).

Strong Q2 Revenue and Earnings Growth

In August, IIPR announced that revenue for the second quarter ended June 30 had soared 183% year-over-year to $24.3 million. (Source: “Innovative Industrial Properties Reports Second Quarter 2020 Results,” Innovative Industrial Properties Inc, August 6, 2020.)

Second-quarter 2020 net income was $13.0 million, or $0.73 per share, a 322% jump over 2019 second-quarter net income of $3.0 million, or $0.30 per share.

Adjusted funds from operations (AFFO), a metric used in real estate, were $21.0 million, or $1.19 per share, up 263% over second-quarter 2019 adjusted AFFO of $5.7 million, or $0.59 per share.

On July 15, Innovative Industrial Properties Inc paid a quarterly dividend of $1.06 per share, a 77% increase over the same period of last year.

At the end of the second quarter, IIPR had cash and cash equivalents of approximately $50.2 million and $323.3 in short-term investments.

During the second quarter, Innovative Industrial Properties Inc added eight properties to its portfolio, totalling 775,000 rentable square feet. Subsequent to the end of the second quarter, IIPR has announced six acquisitions.

Most recently, on September 21, Innovative Industrial Properties Inc closed on the acquisition of a property in Lakeland, FL from an affiliate of Parallel, the parent company one of the largest privately-held, multi-state cannabis operators in the U.S. (Source: “Innovative Industrial Properties Acquires Florida Property and Expands Real Estate Partnership with Parallel, a U.S. Cannabis Company,” Innovative Industrial Properties Inc., September 21, 2020.)

Parallel is the corporate parent company of Surterra Wellness, one of the original licensed vertical operators in Florida. The company’s retail footprint includes 39 retail dispensaries.

Analyst Take

Innovative Industrial Properties Inc remains one of the most reliable pot stocks in the entire cannabis sector. At a time when most pot stocks have stalled, IIPR stock continues to hit record highs.

Not surprisingly, IIPR stock has been torching the broader market, up 66% in 2020 and 225% since March. Thanks to its strong operations, it also continues to raise its annual dividend, which stands at a frothy 4.25%, or $4.24 per share. Strong capital appreciation and dividend growth. You can’t ask for more than that.