Every fledgling industry has some buy-and-hold “forever stocks“. However, it can be difficult to discern these cash cows. The major challenge with a fledgling industry is that it is difficult to predict which stock can make it in the long term. Plenty of stars blaze bright before fading out just as quickly. The cannabis industry has seen its share of false starts – companies that burn out before the world even knew they were a thing. As it turns out, there is one stock that continues to stand the test of time: Innovative Industrial Properties (NYSE: IIPR). But is IIPR the Top Cannabis Stock for 2021?
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IIPR Stock has soared over 4x since Cannin Recommended IIPR as a Strong Buy back in 2019
IIPR: A Long-Term Player
IIPR operates in the sale-leaseback sector as a REIT. Simply put, the company buys indoor farming space and then leases it out to the previous owner (in this case, pot companies in the medical-marijuana space). Its most recent acquisition was a property in San Marcos, Texas, for $3.4 million, for a subsidiary of Parallel, one of the largest privately-held multi-state cannabis operators in the United States.
In fact, IIPR is the first and only publicly-traded company listed on the NYSE that provides real estate to the cannabis sector.
As of March 11, 2021, IIPR owns 68 properties across the United States representing a total of approximately 5.9 million rentable square feet (including approximately 2.1 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years.
IIPR has committed approximately $1.4 billion across its portfolio, including capital invested to date and additional capital commitments to fund future construction and tenant improvements at IIPR’s properties. For instance, IIPR has committed $24 million for Parallel’s San Marcos property. When it has an average lease term of over 16 years, one can be sure that both, IIPR and its clients, are taking a very long-term position. But is IIPR the top cannabis stock for 2021?
Expansion and Growth for IIPR
Medicinal or recreational cannabis is legal in 42 out of 50 US states and IIPR has properties in 18 of those 42 states. Some of the top lawmakers in the US want to federally decriminalize cannabis and if that goes through, cannabis stocks will undoubtedly skyrocket. All pot companies will look to increase production and they may likely turn to IIPR for their real estate needs.
IIPR has anticipated the growing demand for marijuana companies and has acquired 13 properties in the last quarter. According to its Q4 and full-year earnings result for 2020, the company has $126 million in cash and around $619.3 million in short-term investments. It’s a great position to be in to take advantage of the growing US cannabis real estate market.
During 2020, IIPR generated total revenues of approximately $116.9 million, net income of approximately $64.4 million that represents an increase of 162% and 191% respectively from 2019.
The one point that tips the scale in IIPR’s favor is the fact that this cannabis stock has been paying out quarterly dividends, a very unusual occurrence in the cannabis listed-company world. A number of players in this space are loss-making and a dividend payout is a pipedream for a majority but IIPR is returning cash to investors.
IIPR has actually increased its dividend payout since 2017. In 2017, it paid $0.15 as a dividend, increased it to $0.35 in 2018, $1 by the end of 2019, $1.24 in 2020 and its latest payout is $1.32. That’s an increase of 780%!
Bottom Line: Is IIPR the Top Cannabis Stock for 2021?
This cannabis stock has had a good run in the past year, moving up from $59.78 on March 16, 2020, to $188.48 on March 12, 2021. That’s an appreciation of over 215%. This cannabis stock hasn’t seen many troughs in its journey so far which is rare considering it services one of the most volatile industries out there.
IIPR’s dividend yield at its current stock price of $188.48 is 2.63%. Analysts have given IIPR a price target of $217.17. Cannin believes IIPR will continue to be top cannabis stock for 2021 and beyond.
IIPR: Top Cannabis Stock for 2021?
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