The end of the year is now less than five weeks away; and while marijuana stocks may not have ascended to the heavens as in previous years, it's likely to go down as the best year ever for the cannabis industry.

The reason? Look no further than Canada's decision to become the first industrialized country in the world to legalize recreational pot on Oct. 17. Although we're talking about work-in-progress given that growers are nowhere near their full production capacity as of yet, the Canadian weed industry is fully capable of generating billions of dollars in added annual sales from the legalization of adult-use marijuana.

Multiple jars filled with dried cannabis on a countertop.

Image source: Getty Images.

Innovative Industrial Properties made a name for itself this year

It's been an equally banner year for the United States. Despite cannabis still sporting a Schedule I classification on Capitol Hill -- i.e., wholly illegal, prone to abuse, and having no recognized medical benefits -- two more states approved a sweeping medical marijuana initiative. Likewise, the residents of Michigan voted in favor of becoming the 10th state to have legalized recreational weed.

Arguably one of the biggest beneficiaries of this success in the United States is Innovative Industrial Properties (NYSE:IIPR). Innovative Industrial Properties is a real estate investment trust (REIT) that purchases medical cannabis growing and/or processing facilities, then leases these facilities back to growers for an extended period of time. As with all REITs, the company is required to pay a majority of its earnings to shareholders in the form of a dividend in order to avoid normal corporate income taxation.

This year, Innovative Industrial Properties has dazzled investors with three major advancements.

An indoor commercial cannabis grow facility.

Image source: Getty Images.

1. Its property portfolio doubled in size in less than a year

Clearly, the most exciting development in 2018 has been Innovative Industrial Properties' acquisition of new assets. Having ended 2017 with five leased properties in its portfolio, it's since doubled that, with 10 properties under management or development as of Nov. 7, 2018. Since Innovative Industrial makes its living from the rental income, inflationary rent increases, and management fees on its properties, having more properties under management means more money. It's that simple. 

It's also worth pointing out that two of the properties it acquired and leased in 2018 were in the Bay State. Just last week, Massachusetts opened its doors to recreational cannabis sales in a small number of licensed dispensaries. Since federal law prohibits the interstate transport of marijuana, grow facilities within legalized states are being counted on to meet demand. With analysts suggesting that Massachusetts' weed market could be worth as much as $1.8 billion when up to speed, this puts Innovative Industrial Properties' in prime position to succeed.

A cannabis leaf lying atop a neat stack of hundred dollar bills on a dark background.

Image source: Getty Images.

2. The company successfully completed two large capital raises

As a REIT, cash is precious commodity. With these leased properties generating healthy funds from operations on a per-share basis, but nowhere near enough capital to fund new acquisitions, Innovative Industrial Properties has successfully turned to the secondary market for capital raises twice in 2018.

In January, the company aimed to sell 2.8 million shares, but wound up having the entire overallotment of 420,000 shares purchased by the underwriters of the deal. All told, the 3.22 million shares sold raised $79.3 million in net proceeds. 

Then, in early October, the company announced its intentions to sell 2 million shares, which was upped to 2.6 million shares on strong demand less than a day later. With the deal underwriters scooping up the 390,000-share overallotment here as well, the 2.99 million shares sold raised net proceeds of $113.9 million. 

Since REITs are reliant on rental increases and the addition of new properties to drive growth, this cash should fuel Innovative Industrial Properties' portfolio expansion.

A businessman placing crisp hundred dollar bills into two outstretched hands.

Image source: Getty Images.

3. It increased its quarterly dividend yet again

Last, but not least, the company also increased its quarterly dividend for the second time in its history. Having paid six quarterly dividends since debuting on the New York Stock Exchange in 2017, Innovative Industrial Properties passed along a 67% quarterly increase to $0.25 a share from $0.15 a share in December 2017, and announced a 40% hike to its existing quarterly payout of $0.25 a share to $0.35 recently. At $1.40 a year in aggregate payouts, this REIT is yielding nearly 3%. 

Presumably, if the company continues to find attractive new properties to add to its portfolio, adjusted funds from operations, and therefore dividends per share paid, could rise even more.

The big question

Of course, the important question that investors want to know is this: Can Innovative Industrial Properties keep the momentum going in 2019?

Right now, I don't see anything in particular that would slow down management's game plan. Innovative industrial is well capitalized at this point, so it's free to make a handful of new acquisitions (maybe three to five) as it sees fit next year. Plus, with marijuana demand remaining strong in many legalized U.S. markets, the company shouldn't have any trouble finding businesses to lease its properties to.

The only concern would be how aggressive management gets with its expansion efforts. Although new properties are positive, cash-raising tactics that involve selling common stock lead to share-based dilution. This can weigh on existing shareholders and could, assuming the dilution was persistent, slow, halt, or reverse dividend growth.

For now, I remain bullish on Innovative Industrial Properties and expect it to generate modest gains moving forward.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.