If you're highly skeptical of the multibillion-dollar market caps of some of the most well-known marijuana stocks, there are other alternatives. Two that immediately jump to mind are The Green Organic Dutchman (TGOD.F 29.19%) and Innovative Industrial Properties (IIPR 1.22%). The former sports a market cap of a little less than $1 billion, while the latter claims a much smaller market cap of just shy of $400 million.

Innovative Industrial Properties has performed better so far in 2018 and with much lower volatility than The Green Organic Dutchman. But which of these two marijuana stocks is the better pick for investors now?

Marijuana growing in a greenhouse.

Image source: Getty Images.

The case for The Green Organic Dutchman

You could argue that a big reason to buy The Green Organic Dutchman (TGOD) stock is that the company has already weathered its worst headwinds. Big partner Aurora Cannabis opted not to exercise an option to buy a bigger stake in TGOD last month. The company's initial public offering (IPO) stock lock-up period expired last week without a big sell-off. And the huge sell-off of marijuana stocks as Canada's legal recreational marijuana market opened appears to be over.

With these problems behind it, what are the positive factors to buy TGOD stock? For one thing, the company should be able to sell every gram of cannabis it can produce for a while to come. As many predicted, there were widespread product shortages in Canada as the country's recreational marijuana market opened.

As of now, TGOD can't produce any cannabis. However, the company expects to complete its Ontario and Quebec facilities in the first half of 2019. Together, these two facilities will enable TGOD to produce 156,000 kilograms annually. Add to that total another 14,000 kilograms from its Jamaica facility that should be ready to go by the end of this year.

One competitive advantage for TGOD is that it's one of only two certified organic cannabis producers in Canada. This should give the company an edge with customers who prefer organic products. Also, organic products command premium prices.

TGOD is gearing up to compete internationally as well. The company owns nearly half of Jamaican cannabis company Epican, which has already opened one dispensary in the country, with plans to launch four more. TGOD wholly owns HemPoland, a Poland-based company that markets a well-known cannabidiol (CBD) brand in Europe. In addition, the company has a 50-50 joint venture in Mexico, which is projected to be one of the five biggest international medical marijuana markets outside of the U.S. and Canada.

The case for Innovative Industrial Properties

Why consider investing in Innovative Industrial Properties (IIP)? One reason is the company's unique business model. IIP is a real estate investment trust (REIT) that provides capital to medical marijuana businesses. The company develops properties for use in producing medical cannabis and then leases the properties to tenants. IIP currently has nine tenants.

Another big plus for IIP is that it focuses on the huge U.S. market. IIP operates in seven states: Arizona, Maryland, Massachusetts, Michigan, Minnesota, New York, and Pennsylvania. Three of these states -- Arizona, Massachusetts, and Michigan -- should have marijuana markets topping $1 billion by 2022, according to Arcview Market Research and BDS Analytics. 

IIP also has plenty of opportunities to expand. Thirty U.S. states already allow the legal use of medical marijuana. And the medical marijuana markets in the states where the company already operates continue to grow.

Unlike many companies in the cannabis industry, IIP is profitable. It also has a strong balance sheet with no debt. The company's leases are long term, with a weighted average lease length of 15 years and an average yield on invested capital of 15.7%. This should provide a steady stream of cash flow for IIP.

IIP also stands out from most marijuana stocks in that it pays a dividend. As an REIT, the company must return at least 90% of pretax income to shareholders in the form of dividend payments. IIP's dividend currently yields an attractive 3.42%. 

Better buy

This decision is, in my view, practically a no-brainer. The Green Organic Dutchman has a market cap of nearly $1 billion with absolutely no revenue. Meanwhile, Innovative Industrial Partners claims healthy and growing revenue and profits. I think that IIP wins over TGOD.

It is important to note that marijuana remains illegal at the federal level in the U.S. This could present problems for IIP in the future. However, my take is that the likelihood of federal antimarijuana policies easing is greater than the likelihood of further restrictions. I think IIP could provide a good way for aggressive investors to profit from the growth in the U.S. cannabis industry.