With legal cannabis markets opening in states across the U.S., you might think that the stocks of companies serving these markets would be sizzling hot right now. Some are, but others aren't. 

Innovative Industrial Properties (IIPR -0.88%) is definitely in the sizzling category. It ranked among the top five marijuana stocks in the first half of the year. Despite giving up some of its gains in recent weeks, Innovative Industrial Properties is still up by nearly 130% so far in 2019. MedMen Enterprises (MMNF.Q), on the other hand, is squarely in the not-so-hot group. Its shares have dropped more than 30% year to date.

Should investors go with the momentum of Innovative Industrial Properties or pick MedMen as a rebound candidate? Here's what you need to know about these two U.S.-based marijuana stocks.

Marijuana leaf on top of $100 bill

Image source: Getty Images.

The case for MedMen

MedMen focuses on operating upscale cannabis stores. The company currently has 37 retail locations in California, Nevada, New York, Arizona, and Illinois. These stores generate impressive revenue per square foot, even surpassing that of retail leaders such as Apple and Tiffany

The company has plenty of room for growth. One path for growth is via acquisitions. MedMen awaits finalization of its purchase of medical cannabis dispensary chain PharmaCann. Once the deal closes, the company will own 92 retail licenses in 12 states.

MedMen also should generate solid growth with its current locations. The markets in the five states it's in now will almost certainly expand significantly over the next few years. And as more states legalize adult-use recreational marijuana and medical cannabis, MedMen will look to jump into these new markets.

The company is positioned to grow in Canada as well. MedMen and Cronos Group teamed up to launch retail stores throughout the country, although the process is moving slowly, as several key provinces have dragged their heels.

But what about the stock's horrible performance so far this year? A big part of the problem has been the dilution in the value of existing shares as the result of stock offerings to raise additional cash. MedMen's market cap is actually up 13% year to date while its share price has plunged.

Wall Street analysts think that MedMen is destined for a strong rebound. The average one-year price target for the stock reflects a premium of more than 200% above MedMen's current share price.

The case for Innovative Industrial Properties

Innovative Industrial Properties (IIP) reigns as the top cannabis-focused real estate investment trust (REIT) in the U.S. There's a good reason why the stock has performed so well in 2019 so far: Its revenue and profit continue to soar.

The company reported top- and bottom-line year-over-year growth of 155% in the second quarter. IIP now owns 26 properties in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio, and Pennsylvania. All of these properties are leased to cannabis operators with a blended yield on investment of 14.6% and a weighted-average remaining lease term of 15.5 years.

IIP has what I call a "rinse-and-repeat" business model. It acquires properties, invests in the properties to make them fully usable for marijuana production when necessary, then leases the properties to top-quality cannabis operators. The company then uses the cash flow these leases generate to pay for the properties and invest in acquiring additional properties.

Expect IIP to keep growing. Executive Chairman Alan Gold recently stated that the company is seeing "more mature companies looking at our program and coming away very excited and very interested." He attributed this higher level of interest to more companies seeing what IIP does as a great way to raise capital, IIP becoming more well-known in the cannabis industry, and the slowing of Canadian capital markets.

IIP is one of only a handful of profitable cannabis stocks. It also is one of the few companies in the marijuana industry that pays a dividend. IIP's dividend yield currently stands at 2.4%.

Better marijuana stock

Both MedMen and Innovative Industrial Properties should have strong growth prospects. Each company stands poised to benefit as the U.S. cannabis market expands.

However, I think it's pretty clear which one of these is the better marijuana stock. Innovative Industrial Properties is growing faster than MedMen. It's profitable while MedMen isn't. It pays a dividend, whereas MedMen doesn't.

Remember the old saying that "a bird in the hand is worth two in the bush"? MedMen could be really profitable and deliver more growth over the long run than IIP, but IIP is already giving investors pretty much all they want now.