It's nice to be No. 1. And both Canopy Growth (NYSE:CGC) and Innovative Industrial Properties (NYSE:IIPR) can lay claim to being at the top in different ways.

Canopy Growth is the largest marijuana producer in terms of market cap. Innovative Industrial Properties is the leading real estate investment trust (REIT) focused on the medical cannabis industry. 

But which of these marijuana stocks should be the No. 1 choice for investors? Here's how Canopy Growth and Innovative Industrial Properties stack up against each other.

Marijuana in a greenhouse

Image source: Getty Images.

The case for Canopy Growth

Perhaps the strongest argument for buying Canopy Growth is that the company should be able to deliver on part of its name: growth. Canopy's roots are in the Canadian medical marijuana market. Now, though, it's the Canadian recreational marijuana market that presents a huge opportunity for the company.

The problem right now in capitalizing on that opportunity is limited production capacity. Canopy Growth and its peers can't grow enough cannabis to keep up with demand. But that shouldn't be a problem for Canopy too much longer. The company is progressing toward its goal of 5.6 million square feet of production capacity across Canada. 

Canopy Growth isn't limited to Canada. The global medical marijuana market continues to expand rapidly. Canopy is a top player in several key markets, notably Germany.

In the past, Canopy couldn't establish operations in the U.S. because marijuana remained illegal at the federal level. But with the recent U.S. legalization of hemp (cannabis with low levels of psychoactive compound THC), Canopy now plans to quickly enter the U.S. market. Cannabis market-research firm Brightfield Group estimates that the U.S. hemp-based cannabidiol market could grow to $22 billion by 2022.

Funding an expansion into the lucrative U.S. market isn't an issue for Canopy Growth. Major alcoholic beverage company Constellation Brands invested $4 billion in 2018 to increase its stake in Canopy to around 38%. Not only does Canopy now have plenty of cash, the company also has a strong partner with expertise in building successful consumer brands. 

The case for Innovative Industrial Properties

Innovative Industrial Properties is delivering on part of its name, too. The company's focus on developing properties to lease to U.S. medical cannabis growers has provided an innovative solution for small marijuana businesses to get up and running.

Securing operating capital still can present some challenges for U.S. marijuana growers because federal laws restrict the ability of financial institutions to work with the cannabis industry. Innovative Industrial Properties provides the real estate capital needed.

In the process, Innovative Industrial Properties has achieved considerable financial success. The company is profitable. Its balance sheet is solid, with no debt. And it pays an attractive dividend that currently yields 3.13%.

Like Canopy Growth, Innovative Industrial Properties also should deliver strong growth. The company operates in nine states: Arizona, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, and Pennsylvania. At least four of these states should have marijuana markets topping $1 billion by 2022

The company is likely to continue its "rinse and repeat" business model. Revenue from lease payments from existing customers enables the REIT to invest in additional properties. With 31 states now with legalized medical marijuana and 10 states allowing recreational marijuana, Innovative Industrial Properties has lots of opportunities to offer its innovative real estate capital alternatives to customers.

The better marijuana stock

Innovative Industrial Properties claims several advantages over Canopy Growth. As previously mentioned, it's profitable and pays a nice dividend. The company can also operate in the U.S. marijuana market (and not just the hemp market). And its valuation is much more reasonable than Canopy's is. Because of these factors, I think that Innovative Industrial Properties is the better marijuana stock right now.

However, I remain bullish long term on Canopy Growth. The company's relationship with Constellation Brands should enable it to be a big winner in the global marijuana market for a long time. While I think Innovative Industrial Properties has the edge for now, both of these stocks appear to be good picks for investors seeking to profit from the marijuana boom.

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