The House Judiciary Committee just approved a marijuana bill by major-majority. The vote went 24-10 showing bipartisan support for the legislation. Called the Marijuana Opportunity, Reinvestment and Expungement Act or MORE (HR 3884), the bill will remove marijuana from the Controlled Substances Act and pave the way for massive expansion within the U.S. cannabis market.
What Comes Next?
Now the bill has been approved it will make its way to the House floor for a full vote. The bill is expected to pass the House with ease, the question is how quickly it will pass the Senate. And what changes they may make. With more than two-thirds of Americans in favor of decriminalization and legalization of medical use, it seems reasonable to expect the bill will pass. Even so, there is really only one pot stock investors should own right now.
Innovative Industrial Properties (NYSE:IIPR)
is a triple-net lease REIT focused on the cannabis space. The company buys fully operational cannabis facilities from leading companies and then leases the space back to them. The best part is that cannabis producers are still responsible for the upkeep, taxes, and insurance. Innovative Industrial Properties has little to no expenses relative to other forms of REITs.
When it comes to “pot stocks”, Innovative Industrial Properties is unique in more ways than one. While most cannabis companies, particularly in Canada, are struggling with profitability Innovative Industrial Properties is cash-flow positive. Within the small group of U.S. cannabis companies that are turning a profit Innovative Industrial Properties is the only one that pays a dividend. No matter how you slice it, investing in the average cannabis company is high-risk speculation on future growth while Innovative Industrial Properties provides a much safer play.
Innovative Industrial Properties Surpasses The Analysts Wildest Estimates
Innovative Industrial Properties reported Q3 results at the beginning of the month and blew past the consensus estimates with ease. The company reported revenue of $11.6 million, a near 300% gain over the previous year. FFO, a REITs best measure of earnings, increased more than 200%. The results are driven by active acquisitions over the last year that promise to drive similar growth in 2020.
- Innovative Industrial Properties has purchased more than 30 new facilities since the beginning of 2019. The company has added 12 new operators to the fold and expanded relationships with six existing partners.
The reason for the growth is simple; cannabis companies are desperately in need of cash. They need cash to pay for daily operations, corporate expansions/takeovers, and above all else to improve their balance sheets. Cannabis companies are finding it more and more expensive to access capital markets and they need capital in order to grow. A triple-net-lease is an easy, cheap way to get fast cash while ensuring the longevity of their businesses and that of IIPR.
The Dividend Is Attractive
As I mentioned, Innovative Industrial Properties pays a dividend. What I didn’t mention is that the dividend is healthy and growing. At 82.% the payout ratio is in line with most REIT sectors so nothing to worry about there. Considering the expected revenue and earnings growth, and the requirement for REITs to pay most of their earnings as dividends, future increases are all but assured.
Companies Mentioned in This Article
|Innovative Industrial Properties (IIPR)||$73.09||+0.8%||4.27%||54.54||Buy||$148.00|