IPPR Stock Remains An Impressive Pick in The Cannabis Sector

The cannabis industry has been struggling, especially in 2020, due to the market sell-off and the ever-persistent woes within the industry. The COVID-19, however, might be able to help the industry, as more and more states may legalize the substance. With the financial crisis due to the pandemic, states could legalize the industry in order to generate significant tax revenues from the same, gradually giving way to legalization at the federal level. In such a case, the cannabis stock of some companies might be worth a buy. Innovative Industrial Properties Inc (NYSE:IIPR) is one such stock.

What to Expect Now?

The company provides long-term triple-net lease to state-licensed operators in states where cannabis is already legal. As per 2019 Q4 reports, IIP owns 51 properties- spread across 15 states – of which 98.9% is under the lease (based on square footage). These properties are mostly industrial while some other retail. IIP continues to remain one of the very few companies delivering profits and even paying dividends to its shareholders.

The company 2019’s results were also very impressive, with its revenue up by 202% year-over-year to 44.7 million dollars. The major contributor to this increase was the acquisitions made by the company. The company’s net income amounted to 22.1 million dollars- up by 293%- while the EPS stood at 2.03 dollars per share, showing an increase of 171%. The company’s dividend yield was approximately 5%.

As per the regulations, a retail estate investment trust in return for getting special treatment in tax is required to pay at least 90% of the taxable income generated each year as dividends. This implies that till the time IIP remains profitable, investors would receive their dividends.

As cannabis remains illegal at the federal level, companies within the industry find it difficult to raise finance from the financial institutions. IIP’s lease-buyback transaction gives cannabis companies cash for their growth. Thus, federal legalization might bring down profits of IIP.  The analysts, however, expect the company to show a growth of over 44% in the next year.

Author: Travis

Started investing in 2013 with $8,500 I turned that into 180k within a few months. Every year since I have increased the amount of money made from micro cap stocks and stock options.

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