Throughout much of 2022, marijuana stocks have been under substantial pressure amid market volatility. However, Canadian-based REIT, Innovative Industrial Properties (IIPR) continues to outperform as the marijuana stock surged over 32% in 2022. But what are the 3 reasons IIPR will continue to outperform marijuana stocks in 2022?
Related: IIPR: Top Cannabis Stock for 2021?
At Cannin, we tend to favor cannabis ancillary stocks such as Urban-Gro (URGO) and Hydrofarm Holdings (HYFM). In fact, these stocks tend to have stronger fundamentals than the MSOs and it shows. It’s worth noting, both UGRO and HYFM are up over 10x since we first recommended them as strong buys.
1. IIPR’s long-term acquisition strategy fuels robust growth
One of the biggest catalysts for the growth of IIPR is its long-term acquisition strategy. The cannabis stock started with 11 properties in 2019 and has nearly doubled its portfolio with 19 additional acquisitions. In fact, IIPR even raised additional equity capital in May 2020 and avoided debt to fund its acquisition.
Convinced about such a safe upside for this marijuana stock, its shareholders aren’t too skeptical about dilution anymore. Currently, IIPR has 58 properties and nearly 4.4 million square feet of leasable space.
2. A unique business model and solid financials boosts IIPR
Currently, the business model of IIPR is unique and strong. It purchases properties from leading cannabis companies and leases it back to them. Its growth strategy is to build a formidable base of high-end tenants who can pay lease and ensure a steady stream of long-term revenue. IIPR even has a rent-deferral policy in place for the tenants who find it difficult to pay lease amid the pandemic.
Related: 3 Cannabis Stocks to Buy Now
In the first quarter, the IIPR saw a YoY (year-on-year) revenue surge of over 200% to $21.13 million. Meanwhile, the net income also witnessed a massive growth to $11.53 million in Q1 fiscal 2020 against $3.3 million in the same period last year. The company’s operating cash flow for Q1 multiplied nearly 5x to stand at $19.57 million, indicating its cash strength.
3. IIPR: Consistently high dividend payout
IIPR also recorded a better-than-estimated fund from operations, which is a crucial metric for REITs. This helped the marijuana stock to declare impressive dividend pay-outs. In the second quarter, IIPR announced a dividend of $1.00 per share indicating a near 77% increase from Q2 2019.
With the level of earnings growth that the marijuana stock demonstrated in Q1, the dividends will only increase. This makes the pot-based REIT an attractive bet for both income-investors and growth investors.
Bottom Line: IIPR likely to continue to outperform marijuana stocks in 2022
With ever-increasing public support for marijuana legalization, we anticipate new ballot initiatives for statewide legalization in 2022 and beyond. This factor alone could single-handedly propel IIPR stock to new heights. Aside from this, the marijuana stock has a well-formulated business strategy in place in order to maintain its long-term growth.
This coupled with the strong financials of IIPR makes it one of the most lucrative marijuana stocks in the market now. With 25% gains amidst market volatility, we expect the momentum to continue and IIPR to outperform its pot industry peers.
3 Reasons Why IIPR Will Outperform Marijuana Stocks in 2022
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