What happened

Innovative Industrial Properties (IIPR -1.58%) stock declined 15% in October, according to data from S&P Global Market Intelligence. But it's already up 8.6% in November, through Friday, thanks to a 6.7% jump on Thursday. 

For some context, the S&P 500 index was down 6.8% last month and has returned 2.7% so far this month, through Friday. 

Innovative Industrial Properties is a marijuana industry-focused real estate investment trust (REIT). It targets properties in states where marijuana is legal for medical use.

Close-up of a marijuana leaf with water drops on it.

Image source: Getty Images.

So what

We can attribute Innovative Industrial Properties (IIP) stock's drop last month to the cannabis sector pulling back after running up during the late summer in anticipation of Oct. 17. That's when marijuana became legal for adult recreational use in Canada. Nearly all of the companies in the space saw their share prices drop considerably. IIP stock's 15% decline was actually quite mild. Shares of Tilray, Canopy Growth, and Aurora Cannabis -- the big three by market cap -- plunged 34%, 24.2%, and 29.2%, respectively, in October.

Of course, IIP stock didn't run up in late summer as much as the shares of most of the major players (Aurora excepted) either. In general, it's a less volatile stock. That's largely because it's indirectly involved in the marijuana industry, rather than directly, and because it's organized as an REIT, which means that in return for favorable tax treatment it must pay out at least 90% of its income as dividends. On that note, shares are currently yielding 3.15%.  

IIP stock's strong start to November can be attributed to the company's release of robust third-quarter results on Wednesday after the market close. Fueled by acquisitions, revenue jumped 152% year over year to $3.93 million, earnings per share soared 133% to $0.21, and adjusted funds from operations -- which is akin to "earnings" for REITs and drives dividend payouts -- rose 81%.

Here's how IIP stock has performed since its initial public offering (IPO) on the NYSE in December 2016: 

IIPR Total Return Price Chart

Data by YCharts.

Now what

Given Innovative Industrial Properties' relatively small size (it owns just 10 properties), the company should have considerable growth potential for some time. Its possible geographic footprint will probably keep expanding, at least slowly. In the recent U.S. midterm elections, for instance, folks in Missouri and Utah voted to legalize marijuana for medical use, at least for people with some illnesses. (In addition, Michigan voters gave a collective thumbs up to adult-use marijuana.)

Of course, a massive opportunity will come when cannabis is legal on a federal level in the U.S., though that milestone is probably quite a bit out in the future.