Real estate investment trusts are not usually favored by growth stock investors, but Innovative Industrial is unique. It focuses on the marijuana industry, serving growers by providing them with land. The firm had 73 properties across 18 states at the end of the second quarter. This represents about 6.8 million square feet.
It follows a business model that frees real estate-focused companies from the usual federal corporate taxes, so long as they return their free operating cash flow to investors in the form of a dividend.
Investors in IIPR stock thus get a double benefit — its rapidly rising dividend and price performance. The company’s annualized yield currently comes in at 2.5%. This is almost twice the S&P 500 average yield of 1.3%.
Its dividend has jumped from 15 cents per share in Q3 of 2017 to $1.50 per share in the third quarter of 2021. The company, in fact, raised its dividend each of the past six quarters.
Stocks To Watch: IIPR Stock Analysis
IIPR stock is in a buy zone after breaking out of a new flat base Thursday. The ideal buy point here is 253.71, according to MarketSmith analysis. It is buyable as high 266.40.
A flat base reflects unusual strength, especially in challenging markets. Instead of bending lower, it holds steady in price as it gathers itself for another price advance.
The stock recently flexed its muscles in another way by rebounding off its 10-week line.
In addition, the relative strength line has just reached a new high. It has fought back well after a dip in early September.
Innovative Industrial is a prince among marijuana stocks. It currently holds owns a near-perfect IBD Composite Rating of 98.
But while its impressive stock market performance is key, the earnings performance is even better. It is currently in the top 4% of stocks tracked in terms of EPS performance.
EPS has grown by an average of 26% over the past three quarters. This is above the 25% growth rate sought by the CAN SLIM cognoscenti. Earnings are also accelerating in growth.
Big money is buying into Innovative Industrial, which is also key for top stocks to watch. It boasts an Accumulation/Distribution Rating of B-, which represents moderate buying among institutions.
MarketSmith data shows 52% of its shares are currently held by funds. Noteworthy holders include the American Century Small Cap Growth Fund (ANOIX) and the MFS New Discovery A Fund (MNDAX). These are both rated as being among the best performing funds by Investors Business Daily.
Analyst Backs Pot Stock
Piper Sandler analyst Daniel Santos is rating the stock as overweight with a 255 target. He said he believes the firm’s focus on growing relationships with smaller tenants will sustain double-digit yields. He also sees an easing of the regulatory landscape on the horizon.
“We still view federal ‘legalization’ as a 2H22 (second half of 2022) event. While the bill that finally gets put to vote will have less bite than (Senate Majority Leader Chuck) Schumer’s full descheduling, we and management believe what’s most likely to pass will be some version of the SAFE Banking Act,” he said in a research note. “We think this may give larger (multistate operators) more leverage, but believe smaller operators will still have limited capital avenues, thus the impact to IIPR will be more muted.”
He said that exact timing is “hard to predict,” but that it likely be 12 to 18 months before any on-the-ground impact to the industry.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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