If you find it risky to invest directly in marijuana stocks, this real estate investment trust (REIT) might interest you. Innovative Industrial Properties (NYSE:IIPR) is an unconventional marijuana stock -- it's a REIT that provides real estate solutions to medical cannabis companies in the U.S.

Exceptional revenue growth through acquisitions

While most cannabis companies took a hard hit in 2019, Innovative Industrial Properties saw its stock rise by about 65% . The popularity of medical cannabis businesses in the U.S. is driving this revenue growth.

Medical cannabis bud in a prescription bottle

Image source: Getty Images.

Acquisitions were the main contributor to revenue growth. As of May 6, the company is the proud owner of 55 properties with about 4.1 million rentable square feet in various U.S. states. In 2020 alone, Innovative Industrial Properties has acquired nine properties that total about 1.1 million rentable square feet. The locations include Colorado, Florida, Illinois, Massachusetts, Michigan, Ohio, and Virginia. Innovative acquires these properties, then leases them out to mostly medical cannabis companies (which can have trouble getting funding to purchase them on their own), thereby earning a chunk of rental revenue.

Its recent fiscal 2020 first quarter showed a drastic 210% increase in revenue to $21.1 million from the year-ago quarter.

Added benefits: A dividend stock

Besides offering unconventional access to the marijuana sector, this company pays dividends -- an added benefit to investors. 

REIT stocks are well-known for being shareholder-friendly, paying 90% of their net profits as dividends. Innovative has an attractive forward dividend yield of 4.3%. That said, a high yield isn't everything -- consistency in dividend payments determines how stable the companies' financials are. Innovative has been consistently paying dividends since 2017 amid the market's ups and downs.

It hiked its quarterly dividend by 122% year-over-year in the first quarter, to $1 per share. Management noted the rise in rental revenue, net income, and adjusted funds from operations (AFFO) as the drivers behind the dividend increase.

Usually, with a REIT, we look at funds from operations (FFO) and AFFO, which paint a picture of its operating performance and give us an idea of how much cash is available to be paid out as dividends. Innovative saw a 236% increase in AFFO, to $17.8 million, and a 249% increase in net income to $11.5 million in the first quarter.

The company's commitment to providing value to shareholders is evident from its dividend hikes. In the second quarter, management raised the dividend by 6% from Q1, to $1.06 -- which is also an increase of 77% from the year-ago period. This marks the seventh increase since the company went public in December 2016. 

Medical cannabis has tremendous potential

What makes me support Innovative is its potential to grow through investments in the medical cannabis business. Compared with the recreational front, medical marijuana is a more stable and growing source of income. The medical segment held 71% of total worldwide legal cannabis revenue share in 2019 -- and if estimates by Grand View Research prove right, the global legal marijuana market could be worth $73.6 billion by 2027.

The market for medical cannabis is also vast in the U.S., where 33 states and the District of Columbia have legalized it -- whereas recreational cannabis is legal only in 11 states and D.C. Many more states are gearing up to make cannabis legal this year, opening doors of opportunity for this REIT. Innovative's shares are up 26% so far in 2020, while the SPDR S&P 500 ETF has lost 4.1%.

Innovative also ended the quarter with $108.3 million in cash and cash equivalents. Discussing the first-quarter results and COVID-19 crisis, management noted in a press release that "one of the pillars of our business strategy has consistently been a conservative, flexible balance sheet, and we believe we are exceptionally well-positioned to not only weather this unprecedented health crisis and economic disruption but to continue to make real estate investments on a long-term basis with best-in-class tenant operators."

It is a well-known fact that dividend payers can be the best stocks to own during an economic storm -- like the one we are facing right now because of the COVID-19 pandemic. This REIT/pot stock allows you to be a part of the evolving marijuana sector and also offers stability and potential for long-term growth. That said, if you are interested in waiting and enjoying the full potential of the evolving cannabis industry, then I believe Cronos Group (NASDAQ:CRON) and Aphria (NASDAQ:APHA) are better positioned for 2020. They have strong balance sheets, innovative cannabis derivative products, and wise strategies for the future. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.