Is IIPR the Best Cannabis Stock for 2022?
Innovative Industrial Properties, Inc. is a Maryland REIT corporation (with HQ in San Diego) focused on the acquisition, ownership and management of industrial properties which it leases to licensed cannabis operators for their medical-use facilities. As a REIT, it must distribute at least 90% of its taxable income to its shareholders. These distributions come in the form of quarterly dividends.
Related: 3 Cannabis Stocks to Buy Now
IIPR purchases industrial real estate for medical cannabis operators and through a sale-leaseback offer, generates cash. But is IIPR the best cannabis stock for 2022? Let’s take a closer look.
Bottom Line: Is IIPR the best cannabis stock for 2022?
IIPR has a very impressive business model. They are essentially landlords to medical cannabis companies. Of course, these cannabis companies need cash to grow, so they sell their real estate to IIPR and lease it back. This allows them to deploy the money previously sunk into real estate, into operations.
Related: Is it too late to invest in IIPR?
This business model works very well for IIPR. They can write lease terms that guarantee them adequate and rising profit each year which is great for cash flow. Since they are a finance company, they only need a few employees, and they can pay them well.
Investors are enamored with IIPR, sending the stock price above $100 prior to the 2020 covid-19 slide where it dropped to around $40 dollars and it has now rebounded to the mid-$200’s. This high stock price allows them to raise a lot of cash selling few shares, which minimizes share dilution (only 24million shares outstanding). In fact, many cannabis firms are deeply diluting their stock with equity raises.
Should I Buy IIPR Stock?
IIPR is growing fast. In fact, they now own and lease 103 properties to medical cannabis operators totaling over 7.7 million sf and 100% is leased with an average 15-year lease.
One of the many attractive points for this business, as mentioned, is that IIPR revenue has grown consistently and predictably. Thus, investors have flocked to the stock. In fact, they have just paid $1.50 per share in Q4 2021 and have an annualized dividend of $6.00 per common share!
With all this in mind, we think IIPR is a good investment offering investors stable dividends and growth in the coming years. Even if cannabis prices tank and their clients hit hard times, IIPR can sell their real estate. This decreases their risk considerably.
All told, given the financial position of the company, we give IIPR stock a Strong rating now. We think it provides great dividends to it’s shareholders and has a great chance to continue to grow.
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