You've probably heard a lot about Tilray (NASDAQ:TLRY) this year. The Canadian marijuana stock has more than quadrupled since Tilray conducted its initial public offering in July. But there's another marijuana stock that you might not have heard of at all that's as intriguing as Tilray. That stock is Innovative Industrial Properties (IIP) (NYSE:IIPR).

Tilray's market cap is nearly 18 times greater than IIP's market cap. So far this year, Tilray stock's performance is much better than IIP stock's 50%-plus gain. But which of these two marijuana stocks is the better pick for the future?

Marijuana plant underneath a light.

Image source: Getty Images.

The case for Tilray

Don't make your judgment on Tilray based on the company's historical financial performance. Tilray lost $18.7 million in the third quarter. But the company's CEO Brendan Kennedy hit the nail on the head with his statement, "We are in the early stages of achieving our growth potential." 

The primary argument for buying Tilray stock is pretty much what Kennedy said. Tilray really is in the early stages of achieving its growth potential. And that potential is huge.

Canada's marijuana market represents just the tip of the iceberg. It's a big tip, though, with Arcview Market Research and BDS Analytics projecting total revenue of $5.5 billion by 2022, including both medical and recreational marijuana sales.

Tilray is also active in several international markets. The most important of these is Germany, which legalized medical cannabis last year and has a population more than twice that of Canada. And Tilray's acquisition of Chilean medical cannabis producer Alef Biotechnology gives the company a launching pad for the Latin American market.

One knock against Tilray is that it can't enter the U.S. market yet. However, the November 2018 elections in the U.S. could increase the likelihood of federal changes that would clear the way for Canadian marijuana producers to establish U.S. operations. The anticipated U.S. legalization of hemp could also open a door for Tilray to expand into the U.S. 

A couple of major companies outside of the cannabis industry have made significant investments in two Canadian marijuana producers. There's a good chance that others could follow with similar moves. It's possible that Tilray could be among the top candidates for a big deal with a large beverage or tobacco company. 

The case for Innovative Industrial Properties

It's fair to say that Innovative Industrial Properties, like Tilray, is only in the early stages of achieving its growth potential. But several factors differentiate IIP.

One is the company's business model. IIP is a real estate investment trust (REIT) focused on providing real estate capital to the medical cannabis industry. As an REIT, the company must distribute at least 90% of its taxable income to shareholders in the form of dividends. 

Of course, an REIT has to generate positive income to pay those dividends. Unlike many marijuana businesses (including Tilray), IIP is already profitable. Its dividend yield currently stands at 2.8%. And the company can rely on steady revenue, with its leases averaging around 15 years in length.

Another differentiating factor for IIP is its focus on the U.S. The company presently leases nine properties to tenants in seven states: Arizona, Maryland, Massachusetts, Michigan, Minnesota, New York, and Pennsylvania. Of particular note among these states are Arizona, Massachusetts, and Michigan, all of which should have marijuana markets of $1 billion or more by 2022.

IIP's growth prospects include expanding in the states where it currently operates as well as moving into some of the other 22 U.S. states that have legalized medical marijuana. The company's approach of leasing properties to marijuana businesses helps its customers minimize the amount of capital needed -- a big plus in attracting smaller customers in particular.

Better marijuana stock

Both Tilray and Innovative Industrial Properties should have tremendous growth prospects. But only one of these companies is currently profitable, pays a solid dividend, and operates in the biggest marijuana market in the world. That company is Innovative Industrial Properties. I think that IIP is the better pick because of these factors.

In addition, I'm hesitant about Tilray stock right now because the company's IPO lockup period expires on Jan. 15, 2019. That's when insiders can sell shares. If and when they do sell some of their stock, it would likely drive Tilray's share price considerably lower.

IIP also faces risks -- especially with marijuana being illegal at the federal level in the U.S. However, my take is that those risks are decreasing. There's no guarantee that IIP will continue to be successful as the market dynamics change in the medical cannabis industry, but I like the stock's chances.

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