This Cannabis REIT Just Keeps Growing Its 7%+ Dividend

John Smith

Innovative Industrial Properties (IIPR) has been making big moves in the cannabis industry, quickly establishing itself as the go-to real estate investment trust (REIT) for cannabis operators.

With its focused strategy and impressive growth, IIPR offers investors a unique way to gain exposure to the burgeoning cannabis sector while collecting a juicy dividend yield.

Snapping Up Cannabis Real Estate

IIPR specializes in the acquisition, ownership, and management of specialized industrial and retail properties leased to licensed medical cannabis operators.

As of December 2023, the company owned 110 properties located in 19 states, totaling approximately 8.86 million rentable square feet.

IIPR’s properties are 100% leased to state-licensed medical cannabis operators, with a weighted average lease term of over 16 years.

The company is highly focused on expanding its portfolio, targeting both established licensed operators and up-and-coming firms that are expanding operations.

Racking Up Impressive Growth Numbers

IIPR has been executing its focused growth strategy well, delivering exceptional financial results quarter after quarter.

In Q3 2023, the company generated total revenues of $76.46 million, representing an increase of 35% year-over-year. Net income came in at $154 million, up 31% compared to the prior year’s quarter.

Importantly, IIPR has grown its portfolio at a rapid clip. Since 2017, the company has expanded from 11 properties to 108 properties, reflecting a compound annual growth rate of 117%. At the same time, IIPR has maintained a stellar occupancy rate of 100%.

Generating Rock-Solid Cash Flows

IIPR’s long-term triple-net leases contain contractual rent escalations, generating predictable and steadily growing cash flows.

As of Q3 2023, straight-line rents were $205.3 million, reflecting an increase of 31% year-over-year. IIPR also maintains a strong balance sheet, providing it with ample liquidity to continue expanding.

Significantly, IIPR has exceeded analysts’ bottom-line estimates in each of the past four quarters. While the stock is only up 2.6% year-to-date, it appears reasonably valued at current levels. Shares trade at around 11 times forward adjusted funds from operations (FFO), representing a discount to the median for the broader REIT sector.

Delivering a Growing 7%+ Dividend

One of the major draws for IIPR is its impressive – and growing – dividend. The company has increased its dividend for five consecutive years since going public in 2016.

IIPR currently pays a quarterly dividend of $1.80 per share, translating to a yield of over 7% based on the current share price.

With a low payout ratio of just 76% of adjusted FFO, IIPR has plenty of room to keep expanding the dividend. The company aims to return 50-60% of AFFO to shareholders in the form of dividends, while retaining the rest to fund expansion opportunities.

Dividends & Yields

This stock pays an annual dividend of $7.28, which amounts to a dividend yield of 7.21%.

Dividend Per Share$7.28
Dividend Yield7.21%
Earnings Yield5.81%
FCF Yield1.65%
Dividend Growth (YoY)1.69%
Payout Ratio125.95%
Buyback Yield-0.38%
Shareholder Yield6.84%

Dividend History

Ex-Dividend DateCash AmountRecord DatePay Date
Dec 28, 2023$1.820Dec 29, 2023Jan 12, 2024
Sep 28, 2023$1.800Sep 29, 2023Oct 13, 2023
Jun 29, 2023$1.800Jun 30, 2023Jul 14, 2023
Mar 30, 2023$1.800Mar 31, 2023Apr 14, 2023
Dec 29, 2022$1.800Dec 30, 2022Jan 13, 2023
Sep 29, 2022$1.800Sep 30, 2022Oct 14, 2022
Jun 29, 2022$1.750Jun 30, 2022Jul 15, 2022
Mar 30, 2022$1.750Mar 31, 2022Apr 14, 2022
Dec 30, 2021$1.500Dec 31, 2021Jan 14, 2022
Sep 29, 2021$1.500Sep 30, 2021Oct 15, 2021
Jun 29, 2021$1.400Jun 30, 2021Jul 15, 2021
Mar 30, 2021$1.320Mar 31, 2021Apr 15, 2021
Dec 30, 2020$1.240Dec 31, 2020Jan 15, 2021
Sep 29, 2020$1.170Sep 30, 2020Oct 15, 2020
Jun 29, 2020$1.060Jun 30, 2020Jul 15, 2020
Mar 30, 2020$1.000Mar 31, 2020Apr 15, 2020
Dec 30, 2019$1.000Dec 31, 2019Jan 15, 2020
Sep 27, 2019$0.780Sep 30, 2019Oct 15, 2019
Jun 27, 2019$0.600Jun 28, 2019Jul 15, 2019
Mar 28, 2019$0.450Mar 29, 2019Apr 15, 2019
Dec 28, 2018$0.350Dec 31, 2018Jan 15, 2019
Sep 27, 2018$0.350Sep 28, 2018Oct 15, 2018
Jun 28, 2018$0.250Jun 29, 2018Jul 16, 2018
Mar 28, 2018$0.250Mar 29, 2018Apr 16, 2018
Dec 28, 2017$0.250Dec 29, 2017Jan 16, 2018
Sep 28, 2017$0.150Sep 29, 2017Oct 13, 2017
Jun 28, 2017$0.150Jun 30, 2017Jul 14, 2017

Analysts See Upside Potential

Looking ahead, analysts have a moderately bullish outlook for IIPR stock. Among four analysts providing recommendations, one has IIPR as a “Strong Buy” while the other three say it’s a “Hold.”

The average analyst price target of $107.80 suggests upside potential of approximately 7% from current levels.

While not excessively undervalued, IIPR appears attractively priced for long-term investors seeking exposure to the high-growth cannabis industry. The REIT offers an uncommon mix of growth, income, and stability that is hard to match in the cannabis space.

Conclusion: This Specialized REIT Offers Growth and Generous Yield

For investors interested in the cannabis sector, IIPR presents an appealing opportunity. The company is poised to continue benefiting from expanding cannabis legalization in North America.

With its focused strategy, strong balance sheet, and experienced management team, IIPR is well-positioned to keep delivering.

The REIT offers an attractive blend of growth and income. By providing essential real estate to cannabis operators, IIPR can maintain its rapid expansion pace and double-digit AFFO growth.

And shareholders are rewarded with an expanding dividend exceeding 7%. For all these reasons, investors looking for a unique cannabis play may want to take a closer look at IIPR.

Frequently Ask Questions

What exactly does IIPR do?

IIPR is a real estate investment trust (REIT) that focuses on the acquisition, ownership, and management of specialized properties leased to licensed cannabis operators for medical-use cannabis facilities.

How has IIPR been performing financially?

IIPR has been delivering exceptional growth and financial performance. In Q3 2023, total revenues grew 35% year-over-year to $76.4 million, while net income increased 26% to $39.2 million. IIPR has also rapidly expanded its portfolio from 11 properties in 2017 to 110 properties currently.

Why is IIPR’s dividend yield so high?

IIPR offers a very high dividend yield of over 7% because of its strong financial performance and rapidly growing dividend payout. The company has increased its dividend for 5 consecutive years since its IPO and has plenty of room to keep expanding the payout.

Is IIPR stock undervalued right now?

While not greatly undervalued, IIPR does appear attractively valued at current levels. Shares trade at around 11 times forward AFFO, representing a discount to broader REIT peers. Analysts see around 7% upside potential from current prices.

What are the biggest risks for investing in IIPR?

Key risks include regulatory changes in the cannabis industry, tenant credit risks if operators run into financial trouble, and potential oversupply in certain state cannabis markets. However, IIPR mitigates these risks through strict tenant vetting and long-term triple-net leases.

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John Smith is a veteran stock trader with over 10 years of experience in the financial markets. He is a widely followed market commentator known for his astute analysis and accurate predictions. John has authored multiple bestselling books explaining complex market concepts in simple terms for novice investors looking to grow their wealth through strategic trading and long-term investments.
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