Will IIPR Double Again in 2021?
The cannabis industry has been on a roller coaster ride since inception. Tremendous volatility has provided plenty of hits and misses in the cannabis sector. As an example, Aurora Cannabis’ stock price has fallen from over $160 in 2018 to just ( ) now. Want to invest in cannabis stocks without such volatility? Consider ancillary cannabis stocks like IIPR. These are companies that are not directly involved in the production and distribution of cannabis yet they provide essential services to companies that do. San Diego-based Innovative Industrial Properties (NYSE:IIPR) is one such company that has been consistently profitable and is growing rapidly. In 2020, IIPR shares surged – but will IIPR double again in 2021?
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Why Invest in IIPR?
Innovative Industrial Properties is an Industrial REIT with a sole focus is on triple-net-leasing to the cannabis growers. It primarily acquires properties from cannabis operators via a sale-leaseback transaction. IIPR makes real-estate backed loans to those producers and finances their expansion programs. The cannabis industry had to face serious challenges amidst the coronavirus pandemic. But, due to the wave of legalization going on this demand is expected to increase more in the coming days. By its compelling and beneficial offerings to the pot companies, IIPR can take full advantage of the scenario.
It’s worth noting that Cannin.com analysts recommended buying shares of IIPR back in early 2019. At the time, this cannabis stock was trading at $89.34. Today, it is trading at ( ), up significantly since our analysts first made their recommendation. Cannin members continue to write us and thank us profusely for this recommendation and IIPR may continue to be one of the best cannabis stocks for 2021. Cannin.com has over two years of successful stock picks. In fact, 78% of our picks prove to be true within 30 days or less.
IIPR: Excellent Financials in Q3
Innovative Industrial Properties has extremely well-positioned financials. For the period ended September 30, 2020, it was able to raise its revenue by 41% from the last quarter and by a massive 196% on a year over year basis. The adjusted fund from operations also increased by 192% over last year.
Along with an increase in revenues, it managed to increase its asset base as well to $916 million from $690 million with its investment portfolio tripling this quarter. As always it ensured to share its gains with investors by increasing dividend payouts by 10% from previous quarters and by 50% from Q3 of 2019 which means the stock is now yielding 2.7%.
Unlike other REITs, it has very little debt of just $143.7 million and a debt-to-gross assets ratio of 9.4%, which gives it high leverage in its operations. Its rental collections have also been 100% at a time when its peers suffered lack of occupancy with little rental collections.
Also, where interest rates in the US market are pretty low, it offers really attractive cap rates ranging from 3.75%-6% thereby earning high chunks of interest income. Analysts expect if the same trend continues its revenue may jump by 71% along with a 70% growth in EPS by this year.
What next for IIPR investors?
The medical, as well as the recreational cannabis industry is growing at a significant rate. ArcView market research states that, by 2025, all states in the U.S. will probably legalize marijuana. As more states have started opening up, the demand for real estate has been growing immensely.
Innovative Properties has also been eyeing mammoth growth and has been making a string of acquisitions to achieve its goal. Additional benefits from the financing activities are also a bonus.
In the third quarter, it had bought five properties adding 448,000 rentable square feet to its existing base in areas like Florida, Michigan, and New Jersey. It also funded some of its tenants to expand in the areas of Illinois, Ohio, and Pennsylvania by investing $180.3 million and thereby enhancing the existing relationships and establishing new tenant relationships. IIPR’s continuous onslaught of expansions has fueled its revenues and cash flows significantly.
Bottom Line: Will IIPR Double Again in 2021?
IIPR is currently operating in less than half of the states that have legalized medical marijuana so there will be ample partnership and expansion opportunities for the company in the coming months. Also, its strong financial and operational strategies prove it is much superior to many of its peers. Thereby investing in IIPR’s demonstrated business model can possibly provide cannabis investors outsized total returns making it one of the best cannabis stocks for 2021.
Will IIPR Double Again in 2021?
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