Let me first acknowledge that I don't know for sure which marijuana stocks, if any, will actually double your money over the next five years. I don't know with absolute certainty which stocks, regardless of industry, will double your money over the next 20 years. But neither does anyone else.

However, it is possible to make an educated guess as to which marijuana stocks might be big winners. Looking at companies' business prospects and their financial positions help in picking the stocks that appear to have the best shot at delivering a 100% return or more within the next five years.

That's exactly what I set out to do. And I've identified the marijuana stock that I think is the most likely to double your money over the next five years. 

Shadow of a dollar sign on a pile of cannabis leaves.

Image source: Getty Images.

Rule No. 1

In making my decision, I relied heavily on the advice from legendary investor Warren Buffett. The Oracle of Omaha once said that there were only two rules of investing: "Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."

I first eliminated all of the marijuana stocks that have a significant potential of losing your money over the next five years. That weeded out a lot of them (no pun intended).

One of the worst things about many marijuana stocks is that they're unprofitable and have to issue new shares from time to time to fund operations. This results in dilution in the value of existing shares. And dilution is the enemy of anyone striving to avoid losing money on a stock.

But companies that are profitable and continue to deliver earnings growth don't have this problem. That's a key reason why I picked Innovative Industrial Properties (NYSE:IIPR). The medical cannabis-focused real estate investment trust (REIT) is already making plenty of money. IIP's profits more than quadrupled year over year in its last reported quarter.

Sure, IIP's earnings growth will likely slow somewhat. However, there are still tremendous opportunities ahead for the company. It currently owns 55 cannabis properties in 15 states. But there are many more states that have either already legalized medical cannabis or could do so soon. And there are a lot more medical cannabis operators in the states where IIP already does business that could benefit from an influx of cash that the REIT's sale-leaseback transactions offer.

A big boost

Innovative Industrial Properties also gives investors something that most marijuana stocks don't: a dividend. I think the company's dividend significantly boosts the chances of IIP stock doubling over the next five years.

The dividend currently yields just a hair under 5%. If IIP kept the dividend payout at current levels and its stock didn't appreciate at all, the dividend payments alone would double an initial investment in just a little over 14 years.

But Innovative Industrial Properties has consistently increased its dividend. In the last three years, its dividend soared 567% higher. Over the last year, IIP raised its dividend by 67%.

I wouldn't bank on future dividend increases being quite that high. However, I do expect IIP's dividend increases will keep on coming regularly as its earnings grow. And if its earnings grow, its stock will appreciate rather than remain at current levels.

Doubling in only five years?

What would it take for an investment in Innovative Industrial Properties to double your money in five years? A compound annual growth rate (CAGR) of a little under 14%. My view is that IIP can deliver that level of growth.

Assuming that IIP can keep paying a dividend at least at current levels (which I think it can), the stock would need to appreciate at around 9% per year to generate a total return that doubles your money by 2024. Assuming that IIP's share price appreciation correlates pretty closely with earnings growth, the company should be able to deliver the required growth by leasing six to eight additional properties each year.

I'm confident that IIP can pull this off. It added eight new properties in just the first four months of this year, with several of those sale-leaseback deals coming during a global healthcare crisis. 

The biggest risk for Innovative Industrial Properties is if its tenants run into financial trouble and can't pay their rents. While that's a possibility for any REIT, my view is that IIP won't experience these problems to a significant extent. 

I fully expect that IIP will double your money over the next five years. And I expect it'll double my money, too. I recently bought the stock and plan to buy even more soon.