Top Picks 2021: Innovative Industrial Properties (IIPR)

01/13/2021 5:00 am EST

Focus: CANNABIS

Timothy Lutts

Publisher, Cabot Heritage Corporation

Based on the recent action of the red-hot cannabis sector, it’s easy to conclude that there are no bargains in marijuana stocks today, asserts Timothy Lutts, cannabis sector specialist and editor of Cabot Marijuana Investor.

The North American Marijuana Index is up 305% from its March, 2020 low, while the average stock in my portfolio is up more than 400%. Of course, that was a deep pit they had to climb out of, but even relative to January of last year, these stocks have been strong.

Even if they’re not cheap, however, there are still stocks that are not overbought, and that have great potential to grow as this dynamic young sector evolves, and one of them is my choice for 2021.

Innovative Industrial Properties (IIPR) is the leading landlord for the medical marijuana industry in the U.S., with 64 properties in 16 states, totaling 5.2 million square feet, that are 99.3% leased using triple-net leases.

Operating as a real estate investment trust (REIT), the company enables its tenants to use their capital to grow, and then distributes at least 90% of its taxable income to shareholders through quarterly dividends.

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Today, that amounts to an annual yield of 2.7%. But we’re not in it for the yield, though that does provide some stability to the stock. We’re in it for the growth.

In fact, I’ve had the stock in my portfolio in Cabot Marijuana Investor since late 2017 and we’ve seen good gains by the stock every year. A couple of smaller competitors emerged, but Innovative is still king of the hill.

(Editor's note: Last year, Timothy Lutts chose Turning Point Brands (TPB) as his top pick and the shares rose 56% in 2020. The advisor now says, "I still have it. I have not sold a bit."

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