Even the greenest cannabis investors are familiar with Canopy Growth Corporation (CGC -5.92%) and its growing footprint of production facilities in Canada and beyond. What you might not realize, though, is that most budding canna-businesses in the U.S. can't borrow enough money to build a doghouse. Innovative Industrial Properties Inc. (IIPR -0.64%) is essentially a landlord that specializes in leasing properties to state-licensed operators of U.S. medical marijuana facilities.

Canopy Growth is the world's largest medical cannabis company and has fingers in several potentially lucrative pies, but Innovative Industrial Properties already pays its investors a quarterly dividend. Let's stack them side by side to see which is the best pick at the moment.

Marijuana on hundred-dollar bills.

Image source: Getty Images.

The case for Canopy Growth Corporation

It's hard to know what shape the global cannabis industry will take in the years ahead, but Canopy Growth Corporation has one important advantage that will help it play a major role. Earlier this month, Constellation Brands closed on its 5 billion Canadian dollar investment in Canopy Growth, which should give the company's increasingly diverse operations plenty of chances to shine before cash on its balance sheet dwindles.

Canopy Growth also boasts multiyear supply agreements that require the company to supply Canadian provinces with at least 67,000 kilograms annually. To top it off, Canopy reported an industry-leading average selling price of CA$8.94 per gram during the three months ended June.

Basic arithmetic suggests we can expect Canadian supply agreements to add around CA$600 million in annual sales to the top line, but that may not be the case. During the three months ended June, Canopy reported total revenue of CA$26 million, 14% of which came from Germany's extremely high-priced medical marijuana market. While high-margin international sales are a big plus for Canopy Growth now, an oncoming supply glut in the much larger Canadian market will probably take a heavy toll. 

Canopy Growth boasts a whopping $14.1 billion market cap at recent prices that's going to be hard to live up to. Investors are expecting sales to quickly soar far past any amount possible based on present supply agreements, and investors should brace for lower prices ahead. Oversupply in the U.S. has caused average wholesale prices to tumble from a peak of around $4.62 per gram in June 2016 to $2.33 per gram earlier this month, according to Cannabis Benchmarks. A similar drop in the Canadian market would make meeting lofty expectations in the years ahead nearly impossible.

Baby marijuana plants growing out of stacked coins.

Image source: Getty Images.

The case for Innovative Industrial Properties Inc.

If you're looking for a stock that can outperform even if marijuana prices continue to resemble other agricultural commodities, this real estate investment trust (REIT) is right up your alley. Innovative Industrial Properties aims to build facilities and lease them to third-party operators.

States unaccustomed to regulating cannabis sales tend to throw curveballs that make long-term cash flow prediction a complete guessing game for businesses that rent from Innovative Industrial Properties. This REIT should be able to avoid the drama through the use of long-term triple-net leases that leave the renter responsible for variable expenses such as taxes and insurance. 

Innovative Industrial's hands-off approach might not be exciting, but it could put a lot of dividend income in your brokerage account. That's because REITs avoid paying taxes as long as they distribute nearly all of their profits to shareholders. In September, Innovative Industrial treated its investors to a 40% dividend raise, and the shares offer an attractive 3.3% yield at recent prices.

Adjusted funds from operations came in at an annualized $1.10 per share during the first half of 2018, which isn't quite enough to cover a dividend that will cost the company $1.40 per share. Despite the recent shortfall, investors hoping for another big payout bump could get their wish. In August, Innovative Industrial owned nine properties, two of which didn't begin collecting rent until November. At the moment, 3.3% isn't a terribly attractive yield for a REIT, but this one has what it takes to provide a steadily growing income stream that you get to keep no matter what happens to investor sentiment.

The better marijuana stock

Grand View Research expects legal marijuana sales around the globe to reach $146 billion annually by 2025, and Canopy Growth could deliver market-thumping gains if it maintains a share that's already large. At its recent price, though, it has an awfully long way to fall if sales don't meet some lofty expectations. 

Innovative Industrial Properties isn't a risk-free stock, but times need to get awfully tough before its cash flows become unpredictable. That gives the REIT a better chance to outperform over the long run and makes it the better stock pick right now.