Marijuana stocks continue to draw the attention of investors across the globe, and even after the industry's poor performance in 2019, many of those watching it have high hopes for a comeback in 2020. Yet even though most companies that focus on cultivating, growing, and selling cannabis products for medicinal or recreational use took big hits last year, there was one stock in the sector that not only produced strong returns but also paid its shareholders sizable dividends along the way.

Innovative Industrial Properties (NYSE:IIPR) has become the go-to dividend stock for marijuana investors, and it has remained on the upswing even as its cannabis-related peers have struggled. Most investors are confident that the company will pay even larger dividends in 2020, especially given that it has already boosted its payout multiple times in its short history as a publicly traded stock.

Dividend stats on Innovative Industrial Properties

Metric

Current Stat

Quarterly Dividend

$1 per share

Current Yield

4.8%

Number of Consecutive Years With Dividend Increases

2 years

Payout Ratio

233%

Last Increase

December 2019

Data source: Yahoo! Finance. Last increase refers to ex-dividend date.

What makes Innovative Industrial Properties stand out?

The company's business model is what puts it in a great position to make substantial payouts to its shareholders. It purchases commercial properties and leases them out to marijuana cultivators and other medical marijuana companies, which use the sites to grow and process their cannabis. Innovative Industrial is structured as a real estate investment trust, an arrangement that provides it with valuable tax benefits but requires it to distribute almost all of its net income as dividends.

Innovative Industrial has grown quickly, and its dividends have grown along with it. Since declaring its first dividend in mid-2017, the marijuana REIT has raised its quarterly payout six times, including its most recent 28% increase in December. It now pays more than 500% more every quarter than it did initially.

IIPR Dividend Chart

IIPR Dividend data by YCharts.

Even though the stock has risen over the past year, the faster growth of the dividend has boosted Innovative Industrial's yield nearly to the 5% mark -- considerably higher than where it was last year.

What's ahead for Innovative Industrial?

At this point, there's little reason to believe that Innovative Industrial won't keep boosting its payout in 2020. The REIT has continued to find tenants interested in using its services to find suitable properties for their needs. In addition, Innovative Industrial also offers cannabis companies that already have real estate holdings the ability to do sale-and-leaseback transactions to free up capital for reinvestment into their operations.

Greenhouse with rows of cannabis plants under lights.

Image source: Getty Images.

Fundamentally, the trends continue to favor growth for Innovative Industrial's business. New states continue to legalize or consider legalizing medical marijuana, and the potential for legalization of cannabis at the federal level looms as a huge potential catalyst. In its most recent quarter alone, Innovative Industrial added 10 new properties to its portfolio, pushing its total above 30.

Although Innovative Industrial can't stop others from mimicking its business model, it has developed considerable expertise in dealing with the regulatory and compliance requirements that government entities put on cannabis operations. For those looking to get into the industry, Innovative Industrial is a go-to option for real estate solutions.

Expect more dividends in 2020

When Innovative Industrial adds new properties to its portfolio, it typically results in greater earnings and funds from operations. That's the lifeblood of REIT dividend growth, and given that its plans for expansion showing no signs of slowing, the company could well add to its streak of payout increases as early as the next dividend payment in March.