Deregulation is creating a multi-billion-dollar industry in cannabis — but the stocks in the sector need a lot of work, cautions growth stock expert Hilary Kramer, editor of Turbo Trader.

But dig beyond the Big Cannabis cultivators flooding the world with raw plant product and there are plenty of hot spots for investors. Innovative Industrial Properties (IIPR) is one of the brightest.

The business model here is a little different. IIPR doesn’t grow anything. Instead, the company owns 2.8 million square feet of greenhouse space that it leases to medical marijuana cultivators.

All the slots are full and generating rent, which IIPR then passes back to shareholders. That’s right, IIPR is a Real Estate Investment Trust or REIT. This is a cannabis dividend play.

The yield isn’t huge right now at 3.8 percent, but that’s where IIPR gets interesting. Demand for greenhouse space is exploding, giving management a lot of leeway to raise rent and ultimately enrich the dividend year by year.

Two years ago, IIPR paid $0.15 per share quarterly. Here we are now at $0.78, a full 420 percent beyond that minimal starting income stream.

And the sky is the limit. We just got quarterly numbers that blew Wall Street’s most aggressive targets away: revenue practically tripled over the past year. Even management called the growth rate “tremendous.”

Part of that cash lays the groundwork for additional expansion. Since July, the property portfolio has doubled in size, so I expect at least 150 percent dividend expansion over the next few years as those greenhouses fill up with tenants.

Commodity math is our friend here. Growth space is an absolute necessity for any licensed cultivator. While anyone can build a greenhouse, funding restrictions make it tricky for start-up growers to write their own checks.

For many, renting is the only option and IIPR is the only game in town. Admittedly, management has financed its expansion by selling stock, but even after diluting existing shareholders there’s still plenty of cash to go around.

Investors who sold that story over the summer now need to come running back. After all, the float is still extremely narrow. With under 10 million IIPR shares on the market six months ago, we now live in a world where every $1 of profit needs to stretch 14 percent farther to keep all the year-over-year comparisons the same. That’s no problem when cash flow coming in triples.

Admittedly, I’m biased. Since I added IIPR to my Turbo Trader Marijuana Millionaire Portfolio, it’s beaten the big cultivators by 13 percentage points. We’re booking dividends quarter to quarter. I’m looking for a big long-term payout here soon.

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