Research shows that the global cannabis market is expected to grow at a compound annual growth rate (CAGR) of around 23.9% and reach $ 66.3 billion by 2025. As more countries legalize medical and recreational marijuana, marijuana stocks have made strong returns, with some dividends paid. This helps make cannabis stocks very popular with investors.
Receiving dividends isn’t something that comes to mind when thinking about cannabis stocks, and it’s mainly because cannabis companies are not yet making profits and the industry is still too young. Marijuana stocks will continue to grow on optimism that the federal government is getting closer to full legalization of cannabis. As the marijuana industry becomes more mainstream, cannabis companies become profitable and pay dividends to shareholders.
The medical cannabis industry
The medical cannabis industry is growing rapidly and is getting involved in the treatment of the following conditions:
- HIV / AIDS
- Incurable disease
93% of Americans support patient access to medical marijuana when a doctor recommends it. In 2020, U.S. regulated cannabis sales rose 52% since 2019 to approximately $ 20.1 billion. Growth of over $ 45.9 billion is expected by 2025.
If you’re an income investor looking for stability and diversifying your portfolio, consider investing in the following two pot investments: Innovative industrial properties (IIPR) or the ETFMG Alternative Harvest ETF (MJ).
Innovative Industrial Properties Inc (IIPR)
The first stock is Innovative Industrial Properties (IIPR), a real estate investment trust (REIT) with an exclusive focus on the medical cannabis industry that invests in industrial plants and greenhouses.
IIPR was founded in 2016 and has 72 properties in its portfolio with a rentable area of 6.6 million square meters and a 100% occupancy rate. In the final quarter of 2020, the trust was able to collect 100% of its rent where many other REITs were unable to during the pandemic.
The company is the only cannabis-related REIT approved for trading on U.S. exchanges. This has made the stock attractive to investors since the company’s IPO.
As a REIT (trusts that operate income generating properties) at least 90% of its taxable income must be paid back to shareholders as dividends to avoid certain taxes. Over the past three years, the dividend has risen by more than 600% due to the company’s tremendous profit growth. Currently, IIPR has a dividend yield of 3%.
Since becoming a public company, IIPR has increased its dividend payout quickly, with its Funds for Operations (FFO) likely to continue to grow exceptionally well.
Innovative continues to grow with a market value of $ 4.5 billion. You buy freestanding industrial and retail properties directly from state-licensed medical cannabis companies and lease them back over the long term (10 to 20 years). The lease gives IIPR a steady flow of income for years to come, while the sale helps the cannabis company get going.
IIPR is considered the fastest growing REIT in the market today, but those claims haven’t stopped it from being a significant income stock even at a very early stage.
IIPR Financial Results – Year End 2020
Total revenue for the fourth quarter of 2020 was approximately $ 37.1 million, compared to the fourth quarter of 2019, which generated approximately $ 17.7 million. Total revenue growth between the two quarters was 110%.
For the year ended December 31, 2020, total revenues were approximately $ 116.9 million, compared to approximately $ 44.7 million at year-end 2019 – an increase of 162%.
The increase in these two periods was driven by:
- Acquiring and renting new properties
- Contractual rent increases for certain properties
- Further tenant expansion allowances and construction subsidies for existing properties that lead to adjustments to the basic rent
IRR Financial Results – First Quarter 2021
It generated approximately $ 42.9 million in the first quarter of 2021, an increase of 103% over the first quarter of 2020.
IIPR paid its quarterly dividend of $ 1.32 to shareholders in April 2021, an increase of 32% over the dividend of the first quarter of 2020 and an increase of about 6% over the dividend of the fourth quarter of 2020. IIPR has been paying dividends quarterly since 2017, making it an excellent option for income investors.
IIPR’s dividend yield is in the mid-range, with the first quarter dividend 32% higher than that of the first quarter of 2020. This shows that there is potential for dividend growth over time.
Net income attributed to common stockholders of approximately $ 25.6 million, or $ 1.05 per diluted share, was recorded. Adjusted Funds from Operations (AFFO) was booked at approximately $ 38.4 million, or $ 1.47 per diluted share.
Innovative Industrial Properties Inc (IIPR) stock forecast
Innovative Industrial Properties Inc (IIPR) is currently trading at $ 184.86 on June 2, 2021.
Wallet Investor analysts have predicted that IIPR stock will have a price target of $ 292.741 over the next year. Their price target for five years is $ 727.838 per share. They expect sales to grow by around +304.17% over the next five years. The growth potential over a year is +62.56%.
IIPR stock has been on an upward cycle for the past 12 months. During this time, stocks were trending in real estate and rental leasing. Due to a positive trend forecast for the future, IIPR shares are a “great” long-term profitable purchase for investors. The positive outlook for this stock makes it an excellent addition to an investment portfolio.
ETFMG Alternative Harvest ETF (MJ)
Exchange Traded Funds (ETFs) often replicate an index or a basket of securities. They are similar to mutual funds, but they trade like a stock on a stock exchange. There are currently a few marijuana ETFs available to investors, most of which focus on a specific cannabis market.
The ETFMG Alternative Harvest ETF (MJ) debuted in late December 2017 (before that it was a Latin American real estate ETF) as the world’s largest and the first U.S. ETF targeting the global cannabis industry. It currently has total net worth of around $ 1.7 billion.
MJ passively follows the Prime Harvest Index with ETF assets in positions in leading Canadian cannabis companies such as:
- Tilray (TLRY)
- Tree canopy growth (CGC)
- Aurora Cannabis (ACB)
- Cronos Group (CRON)
They also have stakes in medical cannabis companies such as:
- GW Pharmaceuticals plc (GWPH)
- Turning Point Brands, Inc (TPB)
Almost 57% of his assets are in the top 10 holdings, with the remainder being made up of the remaining 22 stocks.
The index consists of companies that generate more than half of their income from legal cannabis-related activities. Holdings also include companies that develop fertilizers, tobacco products, cannabis equipment, plant-based foods, or tobacco. US companies were initially excluded from the fund due to federal bans, but they were included after a change in law.
MJ’s Canadian investments can still benefit, although U.S. holdings will benefit significantly from the future decriminalization of cannabis at the federal level.
MJ currently has a dividend yield of around 2.69% and has been paying dividends quarterly since 2016, making it an excellent option for income investors.
MJ derives much of its return from stock lending. There is a high demand for short-short stocks and MJ meets that demand by borrowing its stocks. Borrowing shares gives them a substantial profit that allows them to distribute the proceeds received to shareholders.
ETFMG Alternative Harvest ETF (MJ) stock forecasts
The ETFMG Alternative Harvest ETF (MJ) is currently trading at USD 21.62 on June 2, 2021.
Wallet Investor analysts have forecast MJ has a one-year price target of $ 27.739 with a five-year target of $ 52.419 per share. They expect growth of around 142.34% over the next five years. The potential return over a year is +28.24%.
MJ shares have been on an upward cycle for the past 12 months. Due to a positive trend forecast for the future, the MJ share is a “very good” long-term purchase with a profit for investors. The positive outlook for this stock makes it an excellent addition to an investment portfolio.
Given the recent regulatory changes that have taken place in the United States, marijuana stocks have gotten pretty exciting for investors. Because of this, stocks that offer dividend options within this sector have received additional interest from investors. With traditional REITs like IIPR, you can expect forward-looking dividend growth potential.
Investors can now get exposure to the US cannabis market, unlike the Canadian sector. Cannabis ETFs can be an excellent place to start a position as the leading marijuana stocks are currently trading at lower levels.
As the cannabis industry continues to grow, more stocks are likely to pay dividends. Many people rely on marijuana products for relaxation or medical treatment. The industry is only going to grow over time, with plenty of opportunity for investors looking for income.
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