Innovative Industrial Properties, Inc. (NYSE:IIPR) has seen a significant rise in its stock price recently. The cannabis Real Estate Investment Trust (REIT) also announced a quarterly cash dividend of $1.82 per share, which remains unchanged from the previous quarter, equating to a 7% dividend yield when annualized. Despite challenges such as industry concerns, higher interest rates, and tenant issues, IIPR managed to increase its dividend by 1.1% in December. The company reported adjusted funds from operations (AFFO) of $2.21 per share for the first quarter of fiscal 2024, beating expectations by $0.16 but slightly down from the previous quarter.
IIPR has been able to cover its dividend comfortably by 121.4%, with a payout ratio of approximately 82.4%. This makes the REIT an attractive investment option, even with its common shares increasing by 45% over the past year. The company is currently trading at 11.9 times its fiscal 2024 AFFO guidance, indicating strong performance. With a focus on safety and stability, IIPR offers a secure way to invest in the US cannabis industry.
The REIT operates as a triple-net lease REIT, with long-term leases that include annual rent escalators. It owns 108 properties leased to 30 tenants across 19 states, totaling 8.9 million rentable square feet. The majority of its portfolio (92%) is allocated to industrial cannabis properties used for cultivation, processing, and manufacturing, while retail properties make up 2%.
IIPR’s top tenant is PharmaCann, a private multi-state operator that contributes 17% of rental revenue. Other major tenants include Ascend Wellness Holdings, Green Thumb Industries, Curaleaf Holdings, and Trulieve Cannabis Corp., together accounting for 33% of rental revenue. These tenants have shown significant growth in the past year, driven by optimism surrounding possible cannabis reclassification.
One key advantage for IIPR is its favorable debt maturity profile, with no debt maturing in 2024 or 2025 and a low leverage ratio of 11%. The company’s total debt of $300 million is set to mature in May 2026, providing a stable financial position. Additionally, IIPR’s 9.00% Series A Preferreds offer investors a yield of 8.3%, further enhancing its investment appeal.
Overall, IIPR presents a compelling investment opportunity within the volatile cannabis market. With a strong dividend coverage, low leverage, and attractive debt maturity profile, the REIT offers a de-risked investment option in a high-risk sector. Investors looking for stability and growth potential may find IIPR to be a promising addition to their portfolio.